(ICON)
The
Target Portfolio
Trust
Annual Report
December 31, 1997
(LOGO)
<PAGE>
(ICON)
<PAGE>
The Target Portfolio Trust
Table of Contents
Page
Shareholder Letter 2
Target's Shareholder Services 8
Portfolio of Investments:
Large Capitalization Growth Portfolio 9
Large Capitalization Value Portfolio 11
Small Capitalization Growth Portfolio 15
Small Capitalization Value Portfolio 19
International Equity Portfolio 24
International Bond Portfolio 27
Total Return Bond Portfolio 29
Intermediate-Term Bond Portfolio 32
Mortgage Backed Securities Portfolio 35
U.S. Government Money Market Portfolio 37
Statements of Assets and Liabilities 38
Statements of Operations 40
Statements of Changes in Net Assets 42
Financial Highlights 44
Notes to Financial Statements 51
Report of Independent Accountants 57
Federal Income Tax Information 59
1
<PAGE>
Dear Target Shareholder:
The impossible proved possible in 1997. The United States
economy continued its exceptional combination of robust
growth, low unemploy-ment, falling inflation, a shrinking
budget deficit and strong corporate earnings, creating
remarkable gains for investors. Rebounding from its 7%
plunge on October 27th, the stock market finished the
end of the year with another solid gain, enabling the
major indices (Dow Jones Industrial Average and S&P 500)
to post returns of more than 20% for an unprecedented
third straight year. However, in the fourth quarter, a
confluence of events including turmoil in Asian markets,
a significant change in market sentiment and a sharp
market correction caused investors to pause and
re-evaluate the market environment.
1997 was a stellar year for bonds, marked by falling
inflation, a relatively inactive Federal Reserve and
rising prices on almost all types of bonds. A financial
crisis in Asia late in the year set off a major rally in
the U.S. Treasury market, where the 30-year bond returned
more than 15% in 1997. Its yield fell to 5.9% on December
31st, its lowest level in over four years. High yield
corporate bonds led all other sectors of the U.S. bond
market in 1997. Emerging market bonds in select Latin
and South American countries, as well as Eastern Europe,
performed well for the year.
Target shareholders continue to benefit from the virtues
of maintaining a diversified portfolio through a customized,
comprehensive investment program. Most of the Target
portfolios have outperformed, or performed in line
with, their respective benchmarks for the year ended
1997. It is important to remember that with a volatile
investment environment, maintaining a diversified
portfolio across a variety of asset classes is key
to achieving your long-term investment goals.
<TABLE>
Performance Summary as of December 31, 1997
<CAPTION>
12/31/96 12/31/97
12 Month* # of
Portfolios NAV NAV
Total Return Funds**
<S> <C> <C>
<C> <C>
Large Capitalization Growth $12.97 $13.58
20.77%
Lipper Growth Fund Avg
25.20 838
Large Capitalization Value 13.97 16.21
29.80
Growth & Income Avg
26.99 624
Small Capitalization Growth 14.93 15.57
20.85
Small Company Avg
20.76 468
Small Capitalization Value 15.22 17.50
29.98
Small Company Avg
20.76 468
International Equity 14.82 14.27
10.60
International Avg
5.49 426
International Bond 10.17 9.17
- -5.73
International Income Avg
- -0.43 46
Total Return Bond 10.28 10.56
9.23
Corporate Debt BBB Avg
10.08 102
Intermediate-Term Bond 10.30 10.42
8.57
Intermediate Investment Grade
8.57 195
Mortgage Backed Securities 10.21 10.45
8.82
U.S. Mortgage Avg
8.58 59
U.S. Government Money Market 1.00 1.00
4.95
U.S. Government Money Fund Avg
4.90 118
</TABLE>
* Source: Lipper Analytical Services for Lipper averages,
and
Prudential Investments Fund Management for Target returns.
Target returns are in bold face type. Returns assume the
reinvestment of all dividends and distributions and take
into account all charges and expenses applicable to an
investment in each portfolio except the annual Target
advisory fee. For retail accounts, the maximum annual
advisory fee is 1.5% of equity portfolio assets and 1.0%
of bond and money market portfolio assets. For retirement
accounts, the maximum advisory fees are 1.25% and 1.35%,
respectively. Past performance is not indicative of future
results and an investor's shares, when redeemed, may be
worth more or less than their original cost.
** Represents the number of funds in each respective Lipper
category.
2
<PAGE>
A Salute to Stocks
The performance of U.S. stocks once again pleased
mutual fund investors. In 1997, the S&P 500 Index
gained 33%, after rising 23% in 1996 and 37% in 1995.
Large cap stocks were favored early in the year as
expectations rose for the Federal Reserve to tighten
interest rates. However, as it became clear that
rates would not be raised, the market became broader,
with investors seeking smaller issues during the
second and third quarters. Larger stocks benefited
from a flight to perceived safety throughout 1997,
with "value" outperforming "growth" by a wide margin.
The same sectors that bolstered the first quarter
performance
of the Large Cap Growth Portfolio, co-managed by Oak
Associates
and Columbus Circle, are the ones that hurt them at year-
end.
Both managers were heavily weighted in technology, and while
technology stocks fared well for much of the year, they
plummeted in the fourth quarter due to worries about
Asian markets. Oak Associates' weighting in technology
companies such as Compaq and Applied Materials added to
the lackluster performance of the Portfolio in the fourth
quarter. Columbus Circle believes that the challenge for
1998 will be to invest in micro-economically dominated
companies that are not as susceptible to the "Asian flu."
Given the weakness the managers experienced in the fourth
quarter, they expect that the holdings in the portfolio
could be leading contenders in a rebound scenario in 1998.
The Large Cap Value Portfolio, co-managed by INVESCO and
Hotchkis & Wiley, outperformed its peer group for both the
fourth quarter and for 1997, as measured by the Lipper
Growth and Income Fund Average. The preference for U.S.
large caps stocks was evident in 1997 as investors sought
a "safer" haven in the U.S. marketplace.
<TABLE>
Average Annual Total Returns as of December 31, 1997
<CAPTION>
Since
Portfolios One Year Three Years
Inception1
<S> <C> <C>
<C>
Large Capitalization Growth 18.97% 20.69%
11.06%
Large Capitalization Value 27.87 25.00
14.70
Small Capitalization Growth 19.05 19.62
14.08
Small Capitalization Value 28.04 21.75
15.54 (15.53)2
International Equity 8.95 12.03
12.63
International Bond -6.67 3.09
2.57
Total Return Bond 8.15 10.02
(9.99)2 6.79 (6.65)2
Intermediate-Term Bond 7.49 9.02
6.33
Mortgage Backed Securities 7.73 9.00
(8.96)2 6.59 (6.49)2
</TABLE>
Note: The average annual return for the Target Portfolios
assumes the imposition of the maximum Target advisory fee
of 1.5% for stock portfolios and 1.00% for the bond
portfolios.
1 The inception date for all portfolios is 1/5/93, except
for International Bond, which is 5/17/94. Past performance
is not indicative of future results.
2 Without waiver of management fees and/or expense
subsidization,
the Portfolio's Average Annual Total returns would have been
lower, as indicated in parentheses ( ).
3
<PAGE>
Specifically, the Asian debt crisis caused investors to
become
increasingly defensive and refocused on fundamental
valuation.
The Portfolio benefited from this refocusing as it was most
heavily weighted in the financial, utility and basic
industry
sectors of the market via stocks such as American General
Corp. and Ford Motor Co. Both managers believe the Portfolio
is well positioned for the current economic and market
environment.
The Small Cap Value Portfolio solidly outperformed its
peers,
as measured by the Lipper Small Company Fund Average, as
well
as the Russell 2000 Index, for both the fourth quarter and
the year ended December 31, 1997. Both co-managers, Lazard
Freres and Wood, Struthers & Winthrop, attributed their
outperformance to their significant weights in the financial
services sector in companies such as North Fork Bancorp.
While the small cap market underperformed the large cap
market (as measured by the S&P 500), for the fourth
consecutive year, the managers believe the tide may
be shifting. The recent turmoil in Southeast Asia
and Japanese economies may help the relative
performance of smaller company shares, as they
tend to be less exposed to global economies, and
may suffer less of an earnings impact.
Although it was a difficult year for small cap growth
stocks, the Small Cap Growth Portfolio, co-managed by
Investment Advisers, Inc. (IAI) and Nicholas Applegate,
strongly outperformed the Russell 2000 Growth Index and
fell in line with the Russell 2000 Index for both the
fourth quarter and one year periods. The Portfolio
was affected by the bad news in the technology sector,
which was hurt by the outlook for declining revenue.
Consumer Products and Allen Telecom were the two stocks
within the Portfolio that were the hardest hit. The
Portfolio was helped by its two holdings in outdoor
advertising, Universal Outdoor Holdings and Lamar.
The managers are approaching 1998 cautiously, believing
that the "Asian flu" could be the catalyst for weaker
corporate profits in many sectors, but they remain
optimistic about the outlook for strong relative
performance.
The Year of the Bond
The performance of the bond markets rewarded investors
overall.
The yield on the 30-year bond began the year at 6.6%, and
rose
during much of the Spring before hitting 7.2% in early
April,
on fears that the Fed would embark on a string of rate
increases.
But that would be as high as rates would go. Subsequent
inflation reports demonstrated that inflation was falling.
As the Fed held off on raising rates, investors, convinced
that short-term rates would remain unchanged until signs of
inflationary pressure emerged, drove up bond prices.
The stellar returns of the bond markets are largely
attributable to low inflation and relatively stable
short-term interest rates. Since
4
<PAGE>
the middle of the year,
Treasury securities even outperformed the Dow Jones
Industrial Average as investors worldwide preferred
the relative safety of Treasuries to foreign debt issues.
Bonds returned a healthy 9.7%, for the year up from 3.6%
in 1996, as measured by the Lehman Brothers Aggregate Index.
The bond market was led by high yield U.S. Corporate bonds
which returned 12.8%. These returns inspired investors.
Many large institutions turned to bonds in recent months
to take advantage of the rising prices and avoid what they
judged to be an overvalued stock market. Fixed income mutual
funds began to attract meaningful assets for the first time
in many years, particularly in the fourth quarter.
Throughout the year, the U.S. dollar remained strong,
encouraging foreign investors to buy U.S. bonds.
The Total Return Bond and the Intermediate Term Bond
Portfolios, both managed by PIMCO, performed in line
with their peers as measured by the Lipper Corporate
Debt and Intermediate Investment Grade Debt Averages.
The manager attributed their performance to both above-
benchmark
duration and maturities, exposure to mortgage-backed
securities
and dollar-denominated Latin American positions which added
to
the overall positive performance for the year. Looking
ahead,
PIMCO believes that events in Asia will inhibit U.S. growth
but should not cause a dramatic slowdown. Inflation should
remain subdued, under pressure from global excess capacity
and cheap imports, including commodities. Therefore, the
manager is convinced that they will provide an opportunity
to add value to the Portfolios by concentrating some
holdings
in the intermediate area of the yield curve, maintaining a
small exposure to developed non-U.S. markets and adding
asset-backed securities for shorter maturity holdings.
5
<PAGE>
Mortgage-backed securities performed well in 1997, returning
9.2%, moderately outperforming comparable duration Treasury
securities for the year. The Mortgage-backed Securities
Portfolio, managed by Wellington Management, performed
in line with both the Lipper U.S. Mortgage Average and
the Lehman Mortgage Backed Securities Index for the
fourth quarter and slightly underperformed both
benchmarks for the entire year. Wellington Management
believes that the inevitable slowdown in Asia will
dampen domestic growth in a rebalancing of trade.
This, coupled with a continued lack of an inflation
threat, will result in a lowering of short-term rates
in the coming months. In this environment, Wellington
plans to employ a longer average maturity strategy
versus the benchmark for this portfolio, as well as
for the U.S. Government Money Market Portfolio which
they also manage.
Asian Fright, European Might
For the most part, the international markets were hurt
in 1997 due to the deterioration of the Asian markets in
the fourth quarter. The Morgan Stanley EAFE Index fell 7.8%
for the quarter, though it did finish up 2.1% for the year.
The fourth quarter plunge in Southeast Asia sent shock waves
all over the world and, as a result of this "Asian flu",
most
markets suffered severe losses. The Asian countries most
affected were Thailand, Malaysia, Korea, Indonesia and the
Philippines. Japan also experienced a volatile 1997, ending
the year with a loss of 26.4% in local currency terms.
Europe
salvaged some of the EAFE's performance for the year with
returns of better than 40% (local currency terms) in
countries such as Portugal, Italy, Switzerland and the
Netherlands.
The International Equity Portfolio, managed by Lazard Freres
Asset Management, surpassed the performance of the Morgan
Stanley EAFE Index by over 3% for the fourth quarter and
by over 8% for the year. Factors contributing to their
exceptional performance were their limited investments
in Japan, low exposure to emerging markets and strong
stock bottom-up selection. Several companies contributed
to the Portfolio's outperformance, including National
Westminster Bank and Rhone Poulenc. Lazard believes
that the Asian crisis and its resulting effect on Asian
imports and exports will have a varying near-term impact
on a wide variety of businesses around the world. However,
since Lazard is a long-term, bottom-up value manager, they
believe that by continuing their investment philosophy of
purchasing businesses at inexpensive valuations, they will
continue to produce good investment returns.
6
<PAGE>
Delaware:
A New Perspective
The international fixed income market was punished by
the Asian market crises in the fourth quarter, falling
1.4% for the quarter and losing 4.3% for the year, as
measured by the Salomon Smith Barney Non-US World
Government Bond Index. The European markets supported
the return of the index, with the strongest markets
represented by Italy and the United Kingdom.
As a result of the rigorous ongoing due diligence and
analysis of the TARGET Investment Analysis Group,
Madison Portfolio Consultants (an independent
investment consulting firm) and TARGET's Board of
Trustees, we concluded that Fiduciary International
was no longer an appropriate manager for the TARGET
Program's International Bond Portfolio. As a result,
Fiduciary International was replaced by Delaware
International in August, 1997. Delaware is a well
respected global investment management organization
with over 60 investment professionals, managing over
$6 billion in assets. Delaware has positioned the
Portfolio by underweighting Japanese issues, which
helped the performance. Delaware's strategy going
forward is to overweight the dollar-based markets
outside the U.S., concentrating in markets such as
Canada and Australia as well as the "core" markets of
Germany and Holland. The manager believes the Portfolio
is now defensively well positioned for 1998 with a duration
that is shorter than the index.
Although the domestic markets thrived in 1997, it is
important to maintain realistic expectations in the
coming year. Rather than worrying about the short-term
fluctuations of the market, it is essential to focus on
the "big picture." Maintaining a diversified portfolio
across asset classes should help you to better achieve
your long-term goals, regardless of short-term market
volatility.
As always, we appreciate your commitment to TARGET and
the opportunity to report our activities to you.
Sincerely,
Brian M. Storms
President, Mutual Funds and Annuities
Your Allocation Mainly
Determines Your Returns
(PIE)
Asset allocation is the process of
designing an overall portfolio
that reflects your personal risk
and return requirements. It helps
you invest in specific amounts of
different securities: corporates,
Treasurys, small caps, large caps,
foreign, etc. Asset allocation is
important because, over the long-term,
it's usually more important to be in
stocks and bonds as a whole than it
is to pick individual stocks and bonds.
In fact, just over 91% of a portfolio's
long-term return is due to the initial
allocation.
Target's asset allocations are designed
for you once you complete the Target
Questionnaire. In this way, the Target
program helps ensure that your overall
account reflects your personal investment
risk and return requirements.
7
<PAGE>
Target's Shareholder Services
Target strives to demonstrate that top managers can
make a difference, asset allocation can limit volatility,
and quality services are worth paying for. So here's a
sampling of the services you receive as a Target
shareholder. This short list should confirm that
your choice to use Target was the right one for
you and your family.
Consulting Services
1) Questionnaire process addresses your investment needs.
2) Personalized investment policy statement (the
Evaluation)
details your risk profile.
3) Sixty-six recommended asset allocations or unlimited
number
of customized allocations are available.
4) Access to top investment advisers who manage Target
portfolios.
5) Adviser monitoring helps ensure that they perform as
expected
over the long term.
6) Adviser changes are made if long-term performance is
poor.
7) Free, unlimited allocation changes help you react to
changing
market conditions.
8) Research services from Ibbotson Associates are used for
allocation construction.
9) IRA analysis details your overall IRA allocation and
suggests a new one, if appropriate.
10) Enhancements and new portfolios keep Target on the
cutting-edge.
11) Personalized 401(k) evaluation helps illustrate the
benefits of such a plan, if appropriate.
12) A Financial Advisor's professional guidance to assist
you.
Reporting Services
1) Customized quarterly reports contain time-weighted and
dollar-weighted returns.
2) Detailed tax information including gains, losses and
average cost per share.
3) Quarterly market commentaries address stock, bond and
international markets.
4) Quarterly adviser comments focus on their specific market
expertise.
5) Detailed performance of most major market indices.
8
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth Portfolio
Portfolio of Investments December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--97.4%
Common Stocks--97.4%
Aerospace--0.6%
28,500 Boeing Co.................. $ 1,394,719
------------
Airlines--1.1%
22,900 Delta Air Lines, Inc....... 2,725,100
------------
Banks--4.6%
28,100 BankAmerica Corp........... 2,051,300
27,000 Citicorp................... 3,413,812
45,000 MBNA Corp.................. 1,229,063
76,000 NationsBank Corp........... 4,621,750
------------
11,315,925
------------
Broadcasting--2.8%
105,600 CBS Corporation............ 3,108,600
135,793 Tele-Communications, 3,793,717
Inc.*....................
------------
6,902,317
------------
Business Services--0.6%
90,000 Xylan Corp.*............... 1,361,250
------------
Computers & Business Equipment--15.0%
141,000 3Com Corp.*................ 4,926,188
228,450 Cisco Systems, Inc.*....... 12,736,087
167,500 Compaq Computer Corp....... 9,453,281
44,300 Gateway 2000, Inc.*........ 1,445,288
200,000 Sun Microsystems, Inc.*.... 7,975,000
------------
36,535,844
------------
Construction Materials--0.6%
26,700 Masco Corp................. 1,358,363
------------
Drugs & Healthcare--15.3%
16,600 Cardinal Health, Inc....... 1,247,075
33,200 Guidant Corp............... 2,066,700
68,000 Lilly (Eli) & Co........... 4,734,500
98,600 Medtronic, Inc............ $ 5,158,012
78,000 Merck & Co., Inc.......... 8,287,500
179,500 Pfizer, Inc............... 13,383,969
20,600 Warner-Lambert Co......... 2,554,400
-----------
37,432,156
-----------
Electrical Equipment--0.7%
35,700 AES Corp.*................ 1,664,513
-----------
Electronics--9.4%
158,900 Ascend Communications, 3,893,050
Inc.*...................
20,000 Aspect Telecommunications 417,500
Corp.*..................
41,400 Electronic Data Systems 1,819,012
Corp....................
106,000 Linear Technology Corp.... 6,108,250
200,000 Maxim Integrated Products, 6,900,000
Inc.*...................
110,000 Xilinx, Inc.*............. 3,856,875
-----------
22,994,687
-----------
Financial Services--5.0%
33,600 Associates First Capital 2,389,800
Corp....................
43,400 Capital One Financial 2,351,738
Corp....................
38,000 CIT Group, Inc............ 1,225,500
36,700 Countrywide Mortgage 1,573,513
Investments, Inc.*......
42,700 Morgan Stanley Dean 2,524,637
Witter*.................
39,750 Travelers Group, Inc...... 2,141,531
-----------
12,206,719
-----------
Foods--0.5%
21,500 Sara Lee Corp............. 1,210,719
-----------
Forest Products--1.2%
42,300 Fort James Corp........... 1,617,975
20,600 Georgia-Pacific Corp...... 1,251,450
-----------
2,869,425
-----------
Industrial Machinery--3.1%
252,000 Applied Materials, 7,591,500
Inc.*...................
-----------
Insurance--1.9%
43,500 American International 4,730,625
Group, Inc..............
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
9
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth Portfolio
(cont'd)
Portfolio of Investments December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Miscellaneous--2.6%
123,700 Cendant Corp.*............. $ 4,252,187
47,100 Tyco International Ltd..... 2,122,444
------------
6,374,631
------------
Newspapers--1.1%
42,100 New York Times Co.......... 2,783,862
------------
Oil & Gas--2.3%
23,000 Atlantic Richfield Co...... 1,842,875
46,300 Schlumberger Ltd........... 3,727,150
------------
5,570,025
------------
Retail Grocery--1.6%
61,000 Safeway, Inc.*............. 3,858,250
------------
Retail Trade--6.1%
69,100 Costco Companies, Inc.*.... 3,083,588
46,100 CVS Corp................... 2,953,281
33,800 Dayton-Hudson Corp......... 2,281,500
52,750 Home Depot, Inc............ 3,105,656
97,500 TJX Companies, Inc......... 3,351,562
------------
14,775,587
------------
Savings And Loan--1.1%
43,500 Washington Mutual, Inc..... 2,775,844
------------
Semiconductors & Equipment--5.6%
170,000 Atmel Corp.*............... 3,155,625
151,400 Intel Corp................. 10,635,850
------------
13,791,475
------------
Software & Services--8.7%
39,800 America Online, Inc........ 3,549,662
117,000 HBO & Co................... 5,616,000
44,400 Microsoft Corp.*........... 5,738,700
90,000 Parametric Technology 4,263,750
Corp.*...................
57,500 Synopsys, Inc.*............ 2,055,625
------------
21,223,737
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Telecommunication--2.9%
27,900 Lucent Technologies, $ 2,228,513
Inc.....................
90,200 NEXTEL Communications, 2,345,200
Inc.....................
46,700 Tellabs, Inc.*............ 2,469,262
-----------
7,042,975
-----------
Telephone--1.6%
62,000 AT&T Corp................. 3,797,500
-----------
Toys & Amusements--0.6%
40,000 Mattel, Inc............... 1,490,000
-----------
Trucking & Freight Forwarding--0.8%
31,600 Federal Express Corp.*.... 1,929,575
-----------
Total common stocks 237,707,323
(cost $170,357,607).....
-----------
SHORT-TERM INVESTMENTS--3.3%
Principal
Amount
(000) Commercial Paper--2.1%
- ----------
$ 2,000 CXC, Inc. 1,998,674
5.97%, 1/5/98...........
3,000 Du Pont (E. I.) De Nemours 2,996,529
& Co.,
5.95%, 1/8/98...........
-----------
Total commercial paper 4,995,203
(cost $4,995,203).......
-----------
Repurchase Agreement--1.2%
2,989 State Street Bank & Trust 2,989,000
Co.,
4.00%, due 1/02/98 in
the amount of $2,989,664
(cost $2,989,000; value
of collateral including
accrued interest
$3,058,844).............
-----------
Total short-term 7,984,203
investments
(cost $7,984,203).......
-----------
Total Investments--100.7%
(cost $178,341,810; Note 245,691,526
4)......................
Liabilities in excess of (1,796,946)
other
assets--(0.7%)..........
-----------
Net Assets--100%.......... $243,894,580
-----------
-----------
</TABLE>
- ---------------
* Non-income producing.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
10
<PAGE>
<TABLE>
Large Capitalization Value Portfolio
Portfolio of Investments December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--97.6%
Common Stocks--97.6%
Aerospace--2.4%
44,000 Boeing Co.................. $ 2,153,250
24,450 Lockheed Martin Corp....... 2,408,325
18,800 Northrop Grumman Corp...... 2,162,000
------------
6,723,575
------------
Agriculture Machinery--1.2%
21,500 Deere & Co................. 1,253,719
82,000 New Holland NV............. 2,167,875
------------
3,421,594
------------
Agriculture Products--1.1%
143,062 Archer-Daniels Midland 3,102,657
Co.......................
------------
Aluminum--1.8%
52,000 Aluminum Company of 3,659,500
America..................
21,000 Reynolds Metals Co......... 1,260,000
------------
4,919,500
------------
Apparel & Textiles--3.0%
37,500 Intimate Brands, Inc....... 902,344
35,000 Reebok International, 1,008,438
Ltd.*....................
104,100 Russell Corp............... 2,765,156
115,000 Shaw Industries, Inc....... 1,336,875
55,000 Unifi, Inc................. 2,237,812
------------
8,250,625
------------
Auto Parts--1.4%
50,000 Dana Corp.................. 2,375,000
39,000 Genuine Parts Co........... 1,323,562
6,667 Meritor Automotive, Inc.... 140,417
------------
3,838,979
------------
Automobiles--3.5%
142,000 Ford Motor Co............. $ 6,913,625
46,000 General Motors Corp....... 2,788,750
-----------
9,702,375
-----------
Banks--8.5%
59,000 Ahmanson (H.F.) & Co...... 3,949,312
11,000 Comerica, Inc............. 992,750
45,000 First Chicago Nbd Corp.... 3,757,500
51,700 First Union Corp.......... 2,649,625
27,000 Keycorp................... 1,911,938
70,000 National City Corp........ 4,602,500
46,200 NationsBank Corp.......... 2,809,537
35,000 Wachovia Corp............. 2,839,375
-----------
23,512,537
-----------
Brewery--0.5%
31,100 Anheuser Busch Companies, 1,368,400
Inc.....................
-----------
Building Products--0.6%
16,000 Georgia-Pacific Corp...... 363,000
35,000 York International 1,384,688
Corp....................
-----------
1,747,688
-----------
Business Services--0.7%
16,000 Dun & Bradstreet Corp..... 495,000
50,000 Ikon Office Solutions, 1,406,250
Inc.....................
-----------
1,901,250
-----------
Chemicals--3.0%
42,500 Dow Chemical Co........... 4,313,750
26,000 Du Pont (E.I.) De Nemours 1,561,625
& Co....................
27,000 Eastman Chemical Co....... 1,608,187
20,000 Great Lakes Chemical 897,500
Corp....................
-----------
8,381,062
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
11
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value Portfolio (cont'd)
Portfolio of Investments December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Computers & Business Equipment--3.7%
40,000 Compaq Computer Corp....... $ 2,257,500
36,000 Hewlett-Packard Co......... 2,250,000
28,000 International Business 2,927,750
Machines Corp............
30,000 Pitney Bowes, Inc.......... 2,698,125
------------
10,133,375
------------
Conglomerate--2.5%
59,200 Dover Corp................. 2,138,600
38,300 Hanson PLC. (ADR).......... 883,294
30,000 Scana Corp................. 898,125
48,000 Textron, Inc............... 3,000,000
------------
6,920,019
------------
Consumer Products--1.0%
15,000 Eastman Kodak Co........... 912,187
51,500 Fortune Brands Inc......... 1,908,719
------------
2,820,906
------------
Domestic Oil--1.6%
32,000 Atlantic Richfield Co...... 2,564,000
51,600 USX - Marathon Group....... 1,741,500
------------
4,305,500
------------
Drugs & Healthcare--7.7%
32,500 Abbott Laboratories........ 2,130,781
41,400 American Home Products 3,167,100
Corp.....................
66,666 Astra AB Class A (ADR)..... 1,145,822
17,000 Baxter International, 857,438
Inc......................
46,000 Bristol Myers Squibb Co.... 4,352,750
80,000 Columbia/HCA Healthcare 2,370,000
Corp.....................
20,000 Merck & Co., Inc........... 2,125,000
87,000 Mylan Laboratories......... 1,821,562
53,000 Schering Plough Corp....... 3,292,625
------------
21,263,078
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Electric Utilities--7.0%
50,000 Central & South West $ 1,353,125
Corp....................
32,000 CMS Energy Corp........... 1,410,000
40,000 DTE Energy Company........ 1,387,500
32,000 Edison International...... 870,000
53,200 Entergy Corporation....... 1,592,675
21,000 General Public Utilities 884,625
Corp.*..................
78,000 Illinova Corp............. 2,101,125
34,000 New York State Electric & 1,207,000
Gas Corp................
48,200 PacifiCorp................ 1,316,462
45,000 PECO Energy Co............ 1,091,250
40,000 Public Service Enterprise 1,267,500
Group Inc...............
80,000 Southern Co............... 2,070,000
85,000 Unicom Corp............... 2,613,750
-----------
19,165,012
-----------
Electrical Equipment--2.0%
20,000 Emerson Electric Co....... 1,128,750
30,000 General Electric Co....... 2,201,250
2,933 Raytheon Company Class 144,634
A.......................
40,000 Raytheon Company Class 2,020,000
B.......................
-----------
5,494,634
-----------
Electronics--0.4%
20,000 Rockwell International 1,045,000
Corporation.............
-----------
Energy--0.2%
15,375 Energy Group PLC.......... 686,109
-----------
Financial Services--3.7%
19,000 Beneficial Corp........... 1,579,375
90,000 Federal National Mortgage 5,135,625
Association.............
12,000 Household International, 1,530,750
Inc.....................
28,700 Washington Mutual, Inc.... 1,831,419
-----------
10,077,169
-----------
Food & Beverages--1.3%
50,000 PepsiCo, Inc.............. 1,821,875
90,000 Tyson Foods, Inc. Class 1,845,000
A.......................
-----------
3,666,875
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
12
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Forest Products--2.3%
16,000 Georgia-Pacific Corp....... $ 972,000
50,000 Kimberly-Clark Corp........ 2,465,625
57,000 Weyerhaeuser Co............ 2,796,563
------------
6,234,188
------------
Gas & Pipeline Utilities--0.4%
27,000 Eastern Enterprises........ 1,215,000
------------
Household Appliances & Home
Furnishings--1.8%
91,800 Whirlpool Corp............. 5,049,000
------------
Insurance--8.7%
80,458 American General Corp...... 4,349,761
15,950 Aon Corp................... 935,069
10,000 General Reinsurance 2,120,000
Corp.....................
30,000 Jefferson-Pilot Corp....... 2,336,250
22,000 Lincoln National Corp...... 1,718,750
38,000 Marsh & McLennan Companies, 2,833,375
Inc......................
59,450 Old Republic International 2,210,797
Corp.....................
92,000 SAFECO Corp................ 4,485,000
11,000 St. Paul Companies, Inc.... 902,687
16,000 TIG Holdings, Inc.......... 531,000
14,000 Transamerica Corp.......... 1,491,000
------------
23,913,689
------------
International Oil--5.4%
25,000 Amoco Corp................. 2,128,125
42,000 Exxon Corp................. 2,569,875
111,000 Occidental Petroleum 3,253,687
Corp.....................
70,000 Phillips Petroleum Co...... 3,403,750
50,000 Repsol S.A. (ADR).......... 2,128,125
40,000 YPF Sociedad Anonima 1,367,500
(ADR)....................
------------
14,851,062
------------
Mining--0.9%
38,200 Phelps Dodge Corp.......... 2,377,950
------------
Miscellaneous--0.7%
52,000 Tenneco, Inc............... 2,054,000
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Paper--1.9%
59,999 International Paper Co.... $ 2,587,457
25,000 Union Camp Corp........... 1,342,188
37,500 Westvaco Corp............. 1,178,906
-----------
5,108,551
-----------
Petroleum Services--0.1%
7,000 Ultramar Diamond Shamrock 223,125
Corp....................
-----------
Plastics--0.5%
51,000 Tupperware Corp........... 1,421,625
-----------
Pollution Control--2.1%
14,761 Browning Ferris 546,157
Industries, Inc.........
187,000 Waste Management, Inc..... 5,142,500
-----------
5,688,657
-----------
Railroads & Equipment--1.0%
35,000 Illinois Central Corp..... 1,192,188
48,000 Norfolk Southern Corp..... 1,479,000
-----------
2,671,188
-----------
Retail Trade--2.2%
41,000 May Department Stores 2,160,188
Co......................
37,000 Penney (J.C.) Co., Inc.... 2,231,562
36,000 Sears, Roebuck & Co....... 1,629,000
-----------
6,020,750
-----------
Retail - Food & Restaurants--0.7%
40,000 McDonald's Corp........... 1,910,000
-----------
Steel--1.2%
25,000 Nucor Corp................ 1,207,813
65,000 USX-U.S. Steel Group, 2,031,250
Inc.....................
-----------
3,239,063
-----------
Telephone--3.2%
49,900 ALLTEL Corp............... 2,049,019
69,000 AT&T Corp................. 4,226,250
20,846 SBC Communications Inc.... 1,526,969
22,000 U.S. West Communications, 992,750
Inc.....................
-----------
8,794,988
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
13
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value Portfolio (cont'd)
Portfolio of Investments December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<S> <C> <C>
Tires & Rubber--0.6%
65,000 Cooper Tire & Rubber Co.... $ 1,584,375
------------
Tobacco--2.7%
64,700 Imperial Tobacco Group 800,662
PLC., (ADR)..............
144,400 Philip Morris Companies, 6,543,125
Inc......................
------------
7,343,787
------------
Trucking & Freight Forwarding--0.6%
51,000 Ryder System, Inc.......... 1,670,250
------------
Technology & Services--1.8%
35,000 Adaptec, Inc.*............. 1,299,375
80,000 Electronic Data Systems 3,515,000
Corp.....................
------------
4,814,375
------------
Total common stocks
(cost $179,281,743)...... 268,633,542
------------
SHORT-TERM INVESTMENTS--2.7%
Principal
Amount
(000)
- ----------
$ 7,320 Seven Seas Series 7,320,040
Government Fund
5.30% (cost
$7,320,040)..............
------------
Total Investments--100.3%
(cost $186,601,783; Note
4)....................... 275,953,582
Liabilities in excess of
other
assets--(0.3%)........... (860,383)
------------
Net Assets--100%........... $275,093,199
------------
------------
</TABLE>
- ---------------
* Non-income producing.
ADR--American Depository Receipts.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
14
<PAGE>
<TABLE>
Small Capitalization Growth Portfolio
Portfolio of Investments December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.3%
Common Stocks--98.3%
Airlines--1.0%
44,100 America West Holdings $ 821,363
Corp.*...................
22,300 KLM Royal Dutch Air Lines 841,825
NV.......................
------------
1,663,188
------------
Apparel & Textiles--2.8%
37,300 G & K Services, Inc........ 1,566,600
17,300 Jones Apparel Group, 743,900
Inc.*....................
31,650 Mohawk Industries, Inc. 694,322
*........................
30,700 Nautica Enterprises, 713,775
Inc.*....................
6,600 Stein Mart, Inc. *......... 176,550
49,500 Stride Rite Corp........... 594,000
8,050 Wolverine World Wide, 182,131
Inc......................
------------
4,671,278
------------
Auto/Truck Manufacturing &
Equipment--3.4%
162,400 Aftermarket Technology 2,943,500
Corp.*...................
16,200 Airborne Freight Corp...... 1,006,425
21,100 Federal - Mogul Corp....... 854,550
32,300 Yellow Corp.*.............. 811,537
------------
5,616,012
------------
Banks--1.8%
12,500 GreenPoint Financial 907,031
Corp.....................
35,100 North Fork Bancorp., 1,178,044
Inc......................
13,300 Webster Financial Corp..... 884,450
------------
2,969,525
------------
Building Products--2.6%
115,200 Advanced Lighting 2,188,800
Technologies, Inc.*......
47,500 Service Experts, Inc.*..... 1,359,687
17,700 Texas Industries, Inc...... 796,500
------------
4,344,987
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Business Services--9.5%
78,300 American Management $ 1,526,850
Systems, Inc.*..........
21,000 Analysts International 724,500
Corp....................
20,300 BISYS Group, Inc. 674,975
(The)*..................
30,800 Catalina Marketing 1,424,500
Corp.*..................
109,800 CCC Information Services 2,168,550
Group Inc.*.............
23,700 GTECH Holdings Corp.*..... 756,919
77,000 INSpire Insurance 1,607,375
Solutions, Inc.*........
26,800 Lamar Advertising Co.*.... 1,065,300
11,400 Robert Half International 456,000
Inc.*...................
40,300 UBICS, Inc.*.............. 604,500
54,100 Universal Outdoor 2,813,200
Holdings, Inc.*.........
65,300 Zebra Technologies 1,942,675
Corp.*..................
-----------
15,765,344
-----------
Chemicals--1.6%
32,300 Lyondell Petrochemical 855,950
Co......................
38,300 Minerals Technologies, 1,740,256
Inc.....................
-----------
2,596,206
-----------
Communication--4.5%
100,000 Allen Telecom, Inc.*...... 1,843,750
142,000 Centennial Cellular 2,911,000
Corp.*..................
30,100 Coherent Communications 839,038
Systems Corp.*..........
25,900 Davox Corp.*.............. 844,987
33,400 Tekelec*.................. 1,018,700
-----------
7,457,475
-----------
Computers & Business Equipment--4.7%
74,800 Black Box Corp.*.......... 2,646,050
118,200 Mastech Corp.*............ 3,752,850
17,400 Quantum Corp.*............ 349,087
19,200 SanDisk Corp.*............ 390,000
30,800 SMART Modular 708,400
Technologies, Inc.*.....
-----------
7,846,387
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
15
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Drugs & Healthcare--1.3%
11,500 Arrow International, $ 425,500
Inc......................
66,500 First Commonwealth, 781,375
Inc.*....................
11,100 IMPATH, Inc.*.............. 363,525
10,300 Scherer (R.P.) Corp.*...... 628,300
------------
2,198,700
------------
Electrical Equipment--3.7%
16,900 Cohu, Inc.................. 517,562
188,377 Computer Products, Inc.*... 4,262,030
34,400 Jabil Circuit, Inc.*....... 1,367,400
------------
6,146,992
------------
Electronics--1.8%
33,900 DSP Group, Inc.*........... 678,000
23,900 Integrated Circuit Systems, 681,150
Inc.*....................
36,300 Orbotech, Ltd.*............ 1,157,062
40,000 Reptron Electronics, 415,000
Inc.*....................
------------
2,931,212
------------
Financial Services--6.3%
40,000 CMAC Investment Corp....... 2,415,000
187,900 Credit Acceptance Corp.*... 1,456,225
95,000 Emergent Group, Inc.*...... 1,318,125
32,600 Enhance Financial Services 1,939,700
Group, Inc...............
22,800 Jefferies Group, Inc....... 933,375
40,500 Money Store, Inc. (The).... 850,500
102,300 Right Management 1,304,325
Consultants, Inc.*.......
10,000 United Asset Management 244,375
Corp.....................
------------
10,461,625
------------
Food & Beverages--2.0%
18,800 Canandaigua Brands, 1,041,050
Inc.*....................
16,500 Dean Foods Co.............. 981,750
11,000 Robert Mondavi Corp.*...... 536,250
22,200 Smithfield Foods, Inc.*.... 732,600
------------
3,291,650
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Homebuilders--1.8%
18,000 Fairfield Communities, $ 794,250
Inc.*...................
12,000 Oakwood Homes Corp........ 398,250
31,100 Ryland Group, Inc.*....... 730,850
43,950 Watsco, Inc............... 1,085,016
-----------
3,008,366
-----------
Hotels & Restaurants--0.9%
22,700 CKE Restaurants, Inc...... 956,237
37,000 Foodmaker, Inc*........... 557,313
-----------
1,513,550
-----------
Household Appliances & Home
Furnishings--2.0%
51,200 Ethan Allen Interiors, 1,974,400
Inc.....................
34,000 Heilig-Meyers Co.......... 408,000
42,900 Pier 1 Imports, Inc....... 970,613
-----------
3,353,013
-----------
Industrial Machinery--2.3%
13,400 Coltec Industries, 310,713
Inc.*...................
24,900 Gardner Denver Machinery 630,281
Inc.*...................
23,200 Graco, Inc................ 865,650
5,000 Kennametal, Inc........... 259,063
7,600 NACCO Industries, Inc..... 814,625
127,300 PPT Vision, Inc*.......... 986,575
-----------
3,866,907
-----------
Insurance--1.7%
22,300 Amerin Corp.*............. 624,400
41,900 Capmac Holdings Inc....... 1,456,025
26,300 Mutual Risk Management, 787,356
Ltd.....................
-----------
2,867,781
-----------
Leisure--0.3%
10,200 Anchor Gaming*............ 568,650
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
16
<PAGE>
<TABLE>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Manufacturing--4.2%
37,600 Aptargroup, Inc............ $ 2,086,800
53,700 Flanders Corp.*............ 496,725
28,300 Kaydon Corp................ 923,287
135,600 PalEx, Inc.*............... 1,610,250
189,900 Polymer Group, Inc.*....... 1,804,050
------------
6,921,112
------------
Medical & Dental Supplies--5.8%
119,500 InControl, Inc.*........... 702,062
26,800 Mentor Corp................ 978,200
31,600 Patterson Dental Co.*...... 1,429,900
74,900 Perclose, Inc.*............ 1,441,825
26,800 Safeskin Corp.*............ 1,520,900
150,400 Xomed Surgical Products 3,609,600
Inc.*....................
------------
9,682,487
------------
Miscellaneous--2.9%
144,300 Strayer Education, Inc..... 4,761,900
------------
Office Equipment & Services--1.3%
49,000 Danka Business Systems PLC 780,938
(ADR)....................
25,400 Miller (Herman), Inc....... 1,385,887
------------
2,166,825
------------
Oil & Gas Exploration/Drilling--2.4%
18,400 Cliffs Drilling Co.*....... 917,700
22,300 Devon Energy Corp.......... 858,550
40,400 Forcenergy, Inc.*.......... 1,057,975
55,300 Marine Drilling Cos., 1,147,475
Inc.*....................
------------
3,981,700
------------
Oil Field/Equipment & Services--4.1%
22,400 Cooper Cameron Corp.*...... 1,366,400
19,000 EVI, Inc.*................. 983,250
30,700 Key Energy Group, Inc.*.... 665,806
28,000 Petroleum Geo-Services ASA 1,813,000
(ADR)*...................
5,500 Tidewater, Inc............. 303,188
VALUE
SHARES DESCRIPTION (NOTE 1)
26,000 UTI Energy Corp.*......... $ 672,750
46,000 Varco International, 986,125
Inc.*...................
-----------
6,790,519
-----------
Pollution Control Equipment &
Services--0.2%
12,000 Superior Services, 346,500
Inc.*................... -----------
Printing & Publishing--1.6%
12,900 Central Newspapers, 953,794
Inc.....................
46,400 Valassis Communications, 1,716,800
Inc.*...................
-----------
2,670,594
-----------
Retail Trade--6.4%
35,000 Ames Department Stores, 612,500
Inc.*...................
39,600 Barnett, Inc.*............ 871,200
32,300 Best Buy Co., Inc.*....... 1,191,062
56,200 Dress Barn, Inc.*......... 1,594,675
35,600 Goody's Family Clothing, 967,875
Inc.*...................
98,000 Lithia Motors, Inc.*...... 1,445,500
28,700 Mac Frugals Bargains 1,180,288
Close-Outs, Inc.*.......
31,600 Michaels Stores, Inc.*.... 924,300
49,700 Ross Stores, Inc.......... 1,807,837
-----------
10,595,237
-----------
Retail/Wholesale--0.9%
29,550 Cellstar Corp.*........... 587,306
21,700 Tech Data Corp.*.......... 843,588
-----------
1,430,894
-----------
Semiconductors & Equipment--1.9%
60,100 Cirrus Logic, Inc.*....... 638,563
19,300 Dallas Semiconductor 786,475
Corp....................
27,150 Vitesse Semiconductor 1,024,912
Corp.*..................
26,600 VLSI Technology, Inc.*.... 628,425
-----------
3,078,375
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
17
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Software--6.1%
20,900 Autodesk, Inc.............. $ 773,300
33,400 Avid Technology, Inc.*..... 893,450
10,900 Citrix Systems, Inc.*...... 828,400
43,800 Digi International, 744,600
Inc.*....................
39,800 Keane, Inc*................ 1,616,875
36,800 Manugistics Group, Inc.*... 1,642,200
11,100 Microchip Technology, 333,000
Inc......................
25,562 Network Associates, 1,351,591
Inc.*....................
23,300 Systems & Computer 1,156,262
Technology Corp.*........
20,300 Transaction Systems 771,400
Architects, Inc.*........
------------
10,111,078
------------
Steel--0.9%
65,200 Bethlehem Steel Corp.*..... 562,350
36,600 Maverick Tube Corp.*....... 926,438
800 National Steel Corp. *..... 9,250
------------
1,498,038
------------
Transportation--3.6%
120,300 Coach USA, Inc.*........... 4,030,050
32,600 Navistar International 808,888
Corp.*...................
33,500 Stolt-Nielsen SA........... 709,781
40,000 Trailer Bridge, Inc.*...... 355,000
------------
5,903,719
------------
Total common stocks
(cost $129,740,398)...... 163,077,826
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--3.4%
Commercial Paper--2.4%
$ 113 Associates Corp. of North $ 112,979
America
6.64%, 1/2/98............
3,884 American Express Co. 3,883,283
6.65%, 1/2/98............
------------
Total commercial paper
(cost $3,996,262)........ 3,996,262
------------
Other--1.0%
312 Seven Seas Money Market 312,396
Fund
5.42%....................
1,324 Seven Seas Series 1,323,943
Government Fund
5.30%....................
------------
Total other
(cost $1,636,339)........ 1,636,339
------------
Total short-term
investments
(cost $5,632,601)........ 5,632,601
------------
Total Investments--101.7%
(cost $135,372,999; Note 168,710,427
4).......................
Liabilities in excess of
other
assets--(1.7%)........... (2,812,291)
------------
Net Assets--100%........... $165,898,136
------------
------------
</TABLE>
- ------------------
* Non-income producing.
ADR--American Depository Receipt.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
18
<PAGE>
<TABLE>
Small Capitalization Value
Portfolio
Portfolio of Investments
December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--94.7%
Common Stocks--94.7%
Aerospace--1.2%
500 AAR Corp................... $ 19,375
15,000 Aeroquip-Vickers, Inc...... 735,938
34,600 Martin Marietta Materials, 1,265,062
Inc......................
------------
2,020,375
------------
Apparel & Textiles--2.7%
33,700 Albany International 775,100
Corp.....................
36,600 Culp, Inc.................. 732,000
26,600 Interface, Inc............. 771,400
45,750 Mohawk Industries, Inc.*... 1,003,641
48,200 Oakley, Inc.*.............. 436,812
33,100 Unitog Co.................. 736,475
------------
4,455,428
------------
Auto Parts--0.7%
21,800 Borg-Warner Automotive, 1,133,600
Inc......................
------------
Auto Related--1.5%
32,000 Amcast Industrial Corp.*... 734,000
25,900 Modine Manufacturing Co.... 883,837
44,748 Myers Industries, Inc...... 763,513
------------
2,381,350
------------
Automobiles--0.6%
23,300 Tower Automotive, Inc.*.... 980,056
------------
Banks--5.4%
17,000 First American Corp........ 845,750
37,000 Firstmerit Corp............ 1,049,875
8,700 HUBCO, Inc................. 340,388
28,200 Long Island Bancorp, 1,399,425
Inc......................
37,300 ML Bancorp, Inc............ 1,119,000
50,200 North Fork Bancorp, Inc.... 1,684,837
39,750 People's Bank.............. 1,510,500
23,700 Susquehanna Bancshares, 906,525
Inc......................
------------
8,856,300
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Broadcasting--0.7%
39,200 NTL, Inc.*................ $ 1,092,700
-----------
Business Services--0.9%
38,200 Bowne & Company, Inc...... 1,523,225
-----------
Chemicals--3.2%
41,550 Ferro Corp................ 1,010,184
46,200 Hanna (M.A.) Co........... 1,166,550
40,050 Learonal, Inc............. 941,175
24,090 Rock-Tenn Co., Cl. A...... 493,845
48,062 RPM, Inc.................. 732,946
37,400 Schulman (A.), Inc........ 939,675
-----------
5,284,375
-----------
Communication--1.0%
54,500 Allen Telecom, Inc.*...... 1,004,844
48,600 Vanguard Cellular System, 619,650
Inc.*...................
-----------
1,624,494
-----------
Computers & Business Equipment--2.1%
27,300 MTS Systems Corp.......... 1,023,750
52,600 Planar Systems, Inc.*..... 539,150
31,400 Stratus Computer, Inc.*... 1,187,312
32,800 Wang Laboratories, 725,700
Inc.*...................
-----------
3,475,912
-----------
Construction & Mining Equipment--0.0%
6,000 JLG Industries, Inc....... 84,750
-----------
Diversified Industrials--5.9%
20,900 Applied Power, Inc........ 1,442,100
28,200 Brady (W.H.) Co........... 874,200
33,400 Carlisle Co., Inc......... 1,427,850
26,650 Clarcor, Inc.............. 789,506
14,200 Dexter Corp............... 613,262
14,800 Donaldson Co., Inc........ 666,925
29,800 Jacobs Engineering Group, 756,175
Inc.*...................
52,600 Lydall, Inc.*............. 1,025,700
35,350 Osmonics, Inc.*........... 558,972
37,600 Teleflex, Inc............. 1,419,400
-----------
9,574,090
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
19
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Drugs & Healthcare--4.3%
45,800 Apria Healthcare Group, $ 615,437
Inc.*....................
20,815 Bergen Brunswig Corp....... 876,832
38,100 Integrated Health Services, 1,188,244
Inc......................
61,600 Perrigo Co.*............... 823,900
11,200 Scherer (R.P.) Corp.*...... 683,200
26,100 Sun Healthcare Group, 505,688
Inc.*....................
49,500 Sunrise Medical, Inc.*..... 764,156
21,100 Vital Signs, Inc........... 411,450
41,100 West Co., Inc.............. 1,222,725
------------
7,091,632
------------
Electric Utilities--0.4%
16,700 Sierra Pacific Resources... 626,250
------------
Electrical Equipment--2.9%
64,100 Anixter International, 1,057,650
Inc.*....................
60,600 Belden, Inc................ 2,136,150
25,900 Oak Industries, Inc.*...... 768,906
39,900 Woodhead Industries, 748,125
Inc......................
------------
4,710,831
------------
Electronics--5.6%
27,300 Bell & Howell Co.*......... 660,319
27,700 Dallas Semiconductor 1,128,775
Corp.....................
25,900 Dynatech Corp.*............ 1,214,062
23,700 Esterline Technologies 853,200
Corp.*...................
15,000 Hadco Corp.*............... 678,750
30,200 Harman International 1,281,612
Industries, Inc..........
11,600 Lam Research Corp.*........ 339,300
55,450 Methode Eletronics, Inc.... 901,063
16,950 Nichols Research Corp.*.... 423,750
56,000 Pioneer Standard 854,000
Electronics, Inc.........
32,800 VLSI Technology, Inc.*..... 774,900
------------
9,109,731
------------
Entertainment--0.4%
22,900 Regal Cinemas, Inc.*....... 638,338
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Financial Services--1.3%
27,500 Amresco, Inc.*............ $ 831,875
22,000 CMAC Investment Corp...... 1,328,250
-----------
2,160,125
-----------
Food - Service/Lodging--1.3%
31,700 Luby's Cafeterias, Inc.... 556,731
47,700 Marcus Corp............... 879,469
23,400 Sbarro, Inc............... 615,713
-----------
2,051,913
-----------
Foods--1.8%
41,250 Flowers Industries, 848,203
Inc.....................
16,100 Lancaster Colony Corp..... 907,638
26,600 Universal Foods Corp...... 1,123,850
-----------
2,879,691
-----------
Gas & Pipeline Utilities--1.6%
8,200 KN Energy, Inc............ 442,800
12,800 National Fuel Gas Co...... 623,200
10,000 Tejas Gas Corp.*.......... 612,500
19,600 Wicor, Inc................ 910,175
-----------
2,588,675
-----------
Homebuilders--0.6%
40,700 Kaufman & Broad Home 913,206
Corp....................
-----------
Hospital Supplies & Services--2.3%
19,800 Beckman Instruments, 792,000
Inc.*...................
47,100 Magellan Health Services, 1,012,650
Inc.*...................
57,700 Sierra Health Services, 1,940,162
Inc.*...................
-----------
3,744,812
-----------
Hotels & Restaurants--0.7%
18,900 Lone Star Steakhouse & 330,750
Saloon*.................
93,800 Ryan's Family Steak 803,163
Houses, Inc.*...........
-----------
1,133,913
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
20
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Household Appliances & Home
Furnishings--2.6%
17,800 Bassett Furniture $ 534,000
Industries, Inc..........
21,000 Chromcraft Revington, 672,000
Inc.*....................
29,200 Department 56, Inc.*....... 839,500
57,100 Furniture Brands 1,170,550
International, Inc.*.....
19,700 La-Z-Boy, Inc.............. 849,562
19,400 Rival Co................... 254,625
------------
4,320,237
------------
Industrial Machinery--7.4%
17,000 Briggs & Stratton Corp..... 825,562
29,950 Crane Co................... 1,299,081
51,900 First Brands Corp.......... 1,398,056
36,300 Flowserve Corp............. 1,014,131
20,200 Graco, Inc................. 753,713
60,609 Mark IV Industries, Inc.... 1,325,822
35,400 Polaris Industries, Inc.... 1,081,912
28,400 Regal Beloit Corp.......... 839,575
26,900 Scotsman Industries, 657,369
Inc......................
37,500 Stewart & Stevenson 956,250
Services, Inc............
34,900 United Dominion Industries 883,406
Ltd......................
39,900 Watts Industries, Inc...... 1,129,669
------------
12,164,546
------------
Insurance--7.5%
23,000 American Bankers Insurance 1,056,563
Group, Inc...............
61,200 Amerin Corp.*.............. 1,713,600
27,300 Blanch (E.W.) Holdings, 940,144
Inc......................
6,500 Capmac Holdings, Inc....... 225,875
23,200 Enhance Financial Services 1,380,400
Group, Inc...............
78,600 Horace Mann Educators 2,235,187
Corp.....................
41,800 NAC Re Corp................ 2,040,362
18,600 Poe & Brown, Inc........... 830,025
16,600 Protective Life Corp....... 991,850
13,400 Vesta Insurance Group, 795,625
Inc......................
------------
12,209,631
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Leisure And Recreation--0.6%
40,500 K2, Inc................... $ 921,375
-----------
Manufacturing--1.2%
13,200 ACX Technologies, Inc.*... 322,575
76,800 International Rectifier 907,200
Corp.*..................
23,700 Roper Industries, Inc..... 669,525
-----------
1,899,300
-----------
Miscellaneous--1.9%
25,125 Applied Industrial 672,094
Technologies, Inc.......
20,500 Aptargroup, Inc........... 1,137,750
46,900 Calpine Corp.*............ 697,638
14,500 Standex International 511,125
Corp....................
2,000 VWR Scientific Products 56,500
Corp.*..................
-----------
3,075,107
-----------
Office Equipment--1.4%
14,900 Hon Industries, Inc....... 879,100
38,500 Hunt Corp................. 911,969
10,000 Miller (Herman), Inc...... 545,625
-----------
2,336,694
-----------
Oil & Gas--1.6%
33,500 Devon Energy Corp......... 1,289,750
19,300 Helmerich & Payne, Inc.... 1,309,987
-----------
2,599,737
-----------
Oil & Gas - Production/Pipeline--0.4%
23,900 Barrett Resources 722,975
Corp.*..................
-----------
Oil - Supplies & Construction--0.8%
7,400 BJ Services Co.*.......... 532,338
12,700 Tidewater, Inc............ 700,087
-----------
1,232,425
-----------
Paper & Paper Products--0.5%
39,800 Wausau Paper Co........... 800,975
-----------
Petroleum Services--1.3%
37,300 McDermott International, 1,366,113
Inc.....................
43,000 Vintage Petroleum, Inc.... 817,000
-----------
2,183,113
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
21
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Pollution Control--0.2%
9,300 Safety-Kleen Corp.......... $ 255,169
------------
Printing & Publishing--2.2%
27,350 American Business Products, 591,444
Inc......................
78,150 Banta Corp................. 2,110,050
31,400 Lee Enterprises, Inc....... 928,262
------------
3,629,756
------------
Professional Services--1.8%
22,100 CDI Corp.*................. 1,011,075
16,500 HSB Group, Inc............. 910,594
16,000 Interim Services, Inc.*.... 414,000
31,800 Metromail Corp.*........... 568,425
------------
2,904,094
------------
Publishing--0.3%
23,300 Gibson Greetings, Inc.*.... 509,688
------------
Railroads & Equipment--0.4%
31,500 ABC Rail Products Corp.*... 630,000
------------
Real Estate--0.5%
39,700 Catellus Development 794,000
Corp.*...................
------------
Real Estate Investment Trust--2.2%
41,500 Arden Realty, Inc.......... 1,276,125
37,300 Glenborough Realty Trust, 1,105,012
Inc......................
28,600 Liberty Property Trust..... 816,888
9,000 Sun Communities, Inc....... 323,438
------------
3,521,463
------------
Retail Trade--0.3%
3,000 Eagle Hardware & Garden, 58,125
Inc.*....................
28,000 Global Directmail Corp.*... 484,750
------------
542,875
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Retail - Apparel--1.5%
53,000 AnnTaylor Stores Corp.*... $ 708,875
34,200 Footstar, Inc.*........... 919,125
11,500 Gymboree Corp.*........... 314,813
18,700 Wet Seal, Inc.*........... 551,650
-----------
2,494,463
-----------
Retail - Food & Drugs--1.1%
51,412 Arbor Drugs, Inc.......... 951,122
52,300 Ruddick Corp.............. 911,981
-----------
1,863,103
-----------
Retailing--2.5%
27,300 Carson Pirie Scott & 1,368,413
Co.*....................
27,300 Lands End, Inc............ 957,206
59,400 Proffitt's, Inc.*......... 1,689,187
-----------
4,014,806
-----------
Savings And Loan--0.7%
18,500 Webster Financial Corp.... 1,230,250
-----------
Steel--0.3%
16,200 Reliance Steel & Aluminum 481,950
Co......................
-----------
Telecommunication--0.1%
19,400 Corecomm, Inc.*........... 196,425
-----------
Tobacco--0.2%
19,200 Swisher International 326,400
Group, Inc.*............
-----------
Toys & Amusements--0.5%
28,600 Russ Berrie & Co., Inc.... 750,750
-----------
Trucking & Freight Forwarding--3.0%
28,000 Circle International 642,250
Group, Inc..............
23,000 CNF Transportation, 882,625
Inc.....................
39,700 The Pittston Brink's 1,597,925
Group...................
37,600 Pittston Burlington Group 987,000
Co......................
48,700 Rollins Truck Leasing 870,512
Corp....................
-----------
4,980,312
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
22
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Trucking & Shipping--0.6%
48,000 Werner Enterprises, Inc.... $ 984,000
------------
Total common stocks
(cost $114,855,513)...... 154,711,391
------------
SHORT-TERM INVESTMENTS--5.9%
Principal
Amount
(000) U.S. Government Securities--4.2%
- ----------
United States Treasury
Bills
$ 151 4.97%, 3/5/98.............. 149,687
43 5.00%, 3/5/98.............. 42,624
450 5.02%, 3/5/98.............. 446,047
439 5.025%, 3/5/98............. 435,139
75 5.03%, 3/5/98.............. 74,340
295 5.04%, 3/5/98.............. 292,398
352 5.05%, 3/5/98.............. 348,889
57 5.06%, 3/5/98.............. 56,495
298 5.07%, 3/5/98.............. 295,356
33 5.09%, 3/5/98.............. 32,706
35 5.095%, 3/5/98............. 34,688
25 5.11%, 3/5/98.............. 24,776
10 5.125%, 3/5/98............. 9,910
40 5.135%, 3/5/98............. 39,641
56 5.20%, 3/5/98.............. 55,490
1,816 5.12%, 5/14/98............. 1,781,649
775 5.13%, 5/14/98............. 760,312
962 5.15%, 5/14/98............. 943,697
6 5.16%, 5/14/98............. 5,886
120 5.17%, 5/14/98............. 117,708
187 5.185%, 5/14/98............ 183,418
159 5.20%, 5/14/98............. 155,945
45 5.23%, 5/14/98............. 44,130
85 5.235%, 5/14/98............ 83,356
50 5.28%, 5/14/98............. 49,025
190 5.30%, 5/14/98............. 186,306
190 5.34462%, 5/14/98.......... 186,385
------------
Total U.S. Government 6,836,003
Securities
(cost $6,836,003)........
------------
</TABLE>
[CAPTION]
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
[C] [S] [C]
Other--1.7%
$ 2,778 Seven Seas Money Market
Fund
5.42%, 1/2/98
(cost $2,777,685).......... $ 2,777,685
------------
Total short-term
investments
(cost $9,613,688)........ 9,613,688
------------
Total Investments--100.6%
(cost $124,469,201; Note 164,325,079
4).......................
Liabilities in excess of
other
assets--(0.6%)........... (910,910)
------------
Net Assets--100%........... $163,414,169
------------
------------
[/TABLE]
- ---------------
* Non-income producing security.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
23
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
Portfolio of Investments
December 31, 1997
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--95.5%
Common Stocks--94.6%
Australia--1.2%
444,000 Westpac Banking Corp....... $ 2,840,524
------------
Denmark--1.2%
37,800 Unidanmark A.S............. 2,774,909
------------
Finland--0.9%
222,600 Merita Bank, Ltd........... 1,216,940
50,280 UPM Kymmene Oy*............ 1,005,425
------------
2,222,365
------------
France--12.8%
27,830 Alcatel Alsthom Generale 3,537,418
d'Electricite............
53,970 Axa-UAP.................... 4,176,095
61,060 Banque Nationale de 3,245,509
Paris....................
18,420 Cie De St. Gobain.......... 2,616,781
37,220 Eaux Cie Generale.......... 5,194,783
15,180 Havas...................... 1,092,123
115,277 Rhone Poulenc S.A.......... 5,163,858
45,600 Societe Nationale Elf 5,303,647
Aquitaine................
------------
30,330,214
------------
Germany--11.0%
52,200 Daimler-Benz A.G........... 3,661,936
36,050 Deutsche Bank A.G.......... 2,545,012
61,750 Dresdner Bank A.G.......... 2,849,023
108,800 Hoechst A.G................ 3,810,223
5,730 Mannesmann A.G. (ADR)...... 2,896,800
89,400 Metallgesellschaft A.G..... 1,634,987
60,780 Metro A.G.................. 2,179,221
9,360 Thyssen A.G................ 2,003,169
8,620 Viag A.G................... 4,643,142
------------
26,223,513
------------
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
Hong Kong--2.3%
109,335 HSBC Holdings PLC......... $ 2,694,927
233,500 Swire-Pacific, Ltd. 'A'... 1,280,649
680,000 Wharf Holdings, Ltd....... 1,491,805
-----------
5,467,381
-----------
Italy--4.7%
609,600 Credito Italiano.......... 1,879,801
634,000 Eni Spa................... 3,594,698
467,680 Fiat Spa.................. 1,360,211
1,010,100 Telecom Italia Spa........ 4,453,804
-----------
11,288,514
-----------
Japan--20.3%
115,000 Honda Motor Co., Ltd...... 4,218,810
51,000 Ito Yokado Co., Ltd....... 2,597,457
421 Japan Tobacco, Inc........ 2,985,724
294,000 Matsushita Electric 4,300,681
Industrial Co., Ltd.....
525,000 Mitsubishi Heavy Inds., 2,187,332
Ltd.....................
141,000 Mitsui Marine & Fire 719,200
Insurance Co., Ltd......
35,900 Nintendo Co., Ltd......... 3,519,338
552 Nippon Telegraph & 4,734,931
Telephone Corp..........
98,000 Omron Corp................ 1,531,133
58,600 Orix Corp................. 4,084,093
41,240 Promise Co., Ltd.......... 2,286,724
417,000 Ricoh Corp., Ltd.......... 5,173,776
326,000 Sekisui Chemical Corp., 1,655,342
Ltd.....................
60,500 Sony Corp................. 5,374,895
537,000 Sumitomo Trust & Banking 2,788,435
Co., Ltd................
-----------
48,157,871
-----------
Korea--0.0%
1 Samsung Electronics Co., 7
Ltd. (GDR)..............
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
24
<PAGE>
<TABLE>
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Malaysia--0.2%
182,000 Genting Berhad............. $ 456,228
------------
Netherlands--3.1%
12,400 Heineken N.V............... 2,158,755
45,450 Philips Electronics N.V.... 2,725,678
44,800 Royal Dutch Petroleum 2,427,600
Co.......................
------------
7,312,033
------------
Spain--1.6%
135,800 Telefonica de Espana 3,877,453
S.A......................
------------
Sweden--3.7%
131,733 Astra AB, Series B......... 2,214,934
31,200 Electrolux AB, Series B.... 2,165,166
205,900 Nordbanken Holding AB...... 1,164,361
95,700 Svenska Handelsbanken, 3,308,562
Series A.................
------------
8,853,023
------------
Switzerland--9.2%
25,210 Credit Suisse Group........ 3,899,165
2,630 Holderbank Financiere 2,145,470
Glarus A.G...............
1,895 Nestle S.A................. 2,838,869
2,771 Novartis A.G.*............. 4,494,436
1,730 SMH AG Swiss Corp.......... 954,271
1,536 Societe Generale 2,943,334
Surveillance
Holding S.A..............
9,520 Zurich 4,534,574
Versicherungesellschaft...
------------
21,810,119
------------
United Kingdom--22.4%
406,000 B.A.T Industries PLC....... 3,702,379
248,557 British Aerospace PLC...... 7,083,222
194,600 British Petroleum Co. 2,574,272
PLC......................
777,900 BTR PLC.................... 2,350,970
385,606 Cadbury Schweppes PLC...... 3,891,857
436,111 Diageo PLC................. 3,989,860
206,740 EMI Group PLC.............. 1,725,018
334,600 General Electric Co. PLC... 2,168,095
185,500 Granada Group PLC.......... 2,833,559
1,036,900 Lucas Varity PLC........... 3,661,683
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
448,000 Mirror Group Newspapers $ 1,434,888
PLC.....................
437,400 National Power PLC........ 4,310,577
270,600 National Westminster Bank 4,497,940
PLC.....................
232,400 Prudential Corp. PLC...... 2,830,011
367,350 Rank Group PLC............ 2,045,432
490,400 Unilever PLC.............. 4,218,309
-----------
53,318,072
-----------
Total common stocks 224,932,226
(cost $188,185,362).....
-----------
Preferred Stocks--0.9%
Italy--0.9%
1,470,440 Fiat Spa 2,244,312
(cost $3,477,102)....... -----------
Total long-term 227,176,538
investments
(cost $191,662,464).....
-----------
SHORT-TERM INVESTMENTS--4.2%
Principal
Amount
(000) U.S. Government Securities--4.2%
- ----------
United States Treasury
Bills
$ 10,255 4.98%, 5/14/98 10,059,273
(cost $10,057,928)......
-----------
Total Investments--99.7%
(cost $201,720,392; Note 237,235,811
4)......................
Other assets in excess of 615,087
liabilities--0.3%.......
-----------
Net Assets--100%.......... $237,850,898
-----------
-----------
</TABLE>
- ------------------
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
* Non-income producing securities.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
25
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
Portfolio of Investments
December 31, 1997
The industry classification of portfolio holdings and other
net assets shown as a percentage of net assets as of
December 31, 1997 was as follows:
Banking........................................ 15.9%
Telecommunications............................. 5.5
Insurance...................................... 5.2
Automobiles.................................... 4.8
Conglomerate................................... 4.4
Food & Beverage................................ 4.3
U.S Government Securities...................... 4.2
Utilities...................................... 4.0
Energy......................................... 3.7
Electrical Equipment........................... 3.6
Consumer Durable Goods......................... 3.2
Retail......................................... 3.1
Aerospace/Defense.............................. 3.0
Chemicals...................................... 2.9
Pharmaceuticals................................ 2.8
Tobacco........................................ 2.8
Diversified Industries......................... 2.7
Manufacturing.................................. 2.6
Office Equipment & Supplies.................... 2.2
Intergrated Oil................................ 2.1
Leasing........................................ 1.7
Steel.......................................... 1.6
Automotive Parts............................... 1.5
Oil & Gas Services............................. 1.5
Software....................................... 1.5
Business & Public Services..................... 1.2
Industrials.................................... 1.2
Consumer Goods................................. 1.2
Electronics.................................... 1.1
Financial Services............................. 1.0
Recreation..................................... 0.9
Miscellaneous.................................. 2.3
-----
99.7
Other assets in excess of liabilities.......... 0.3
-----
100.0%
-----
-----
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
26
<PAGE>
<TABLE>
International Bond Portfolio
Portfolio of Investments
December 31, 1997
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--96.0%
Australia--2.8%
Queensland Treasury Corp.,
A$ 1,250 8.00%, 8/14/01............ $ 872,937
----------
Canada--9.5%
Canadian Gov't. Bonds,
C$ 1,300 7.50%, 12/1/03............ 1,000,665
1,000 8.75%, 12/1/05............ 839,648
Deutsche Fin(Neth),
1,500 7.00%, 1/7/04............. 1,105,280
----------
2,945,593
----------
Denmark--3.1%
Danish Gov't. Bonds,
DKr 2,500 8.00%, 11/15/01........... 403,063
3,500 7.00%, 12/15/04........... 557,240
----------
960,303
----------
Germany--29.7%
Abbey National Treasury,
DM 2,500 5.625%, 9/30/02........... 1,416,799
Austrian Gov't. Bonds,
2,500 7.25%, 5/3/07............. 1,568,971
Deutsche Pfandbriefe
Hypobk,
2,500 5.625%, 2/7/03............ 1,406,376
DSL Finance NV,
2,000 5.75%, 3/19/09............ 1,083,965
Finland Gov't. Bonds,
2,500 5.50%, 2/9/01............. 1,443,898
German Gov't. Bonds,
4,000 6.00%, 1/5/06............. 2,322,466
----------
9,242,475
----------
Italy--8.0%
Italian Gov't. Bonds,
L 500,000 10.50%, 7/15/00........... 318,683
3,000,000 12.00%, 1/1/03............ 2,185,981
----------
2,504,664
----------
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Japan--14.4%
Asian Dev. Bank,
Yt 100,000 3.125%, 6/29/05........... $ 835,184
Federal National Mortgage
Assn.,
140,000 2.00%, 12/20/99........... 1,099,563
Japan Dev. Bank,
130,000 5.00%, 10/1/99............ 1,070,307
Japanese Gov't. Bonds,
50,700 2.50%, 6/20/07............ 408,567
Kingdom of Belgium,
130,000 5.00%, 12/17/99........... 1,079,268
----------
4,492,889
----------
Netherlands--7.3%
Dutch Gov't. Bonds,
NLG 2,000 9.00%, 5/15/00............ 1,085,493
2,000 7.50%, 1/15/23............ 1,195,473
----------
2,280,966
----------
New Zealand--6.0%
New Zealand Gov't. Bonds,
NZ$ 700 6.50%, 2/15/00............ 397,716
1,600 10.00%, 3/15/02........... 1,016,834
750 8.00%, 11/15/06........... 461,835
----------
1,876,385
----------
Spain--3.9%
Spanish Gov't. Bonds,
Pts 160,000 5.00%, 1/31/01............ 1,056,515
25,000 5.25%, 1/31/03............ 164,916
----------
1,221,431
----------
Sweden--3.0%
Toyota Motor Credit,
SEK 7,000 7.50%, 8/6/01............. 926,806
----------
United Kingdom--8.3%
European Investment Bank,
Bonds,
9 200 8.00%, 6/10/03............ 344,596
Treasury Corp. Victoria,
800 8.75%, 7/9/03............. 1,423,062
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
27
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
International Bond Portfolio
(cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
United Kingdom--(cont'd.)
United Kingdom Treasury
Bonds,
9 500 7.00%, 11/6/01............ $ 831,259
----------
2,598,917
----------
Total long-term
investments
(cost $30,489,530)...... 29,923,366
----------
SHORT-TERM INVESTMENTS--0.5%
Repurchase Agreements--0.5%
US$ 160 State Street Bank & Trust 160,000
Co., 2.00%, due 1/2/98
in the amount of
$160,018 (cost $160,000;
value of collateral
including accrued
interest is $164,550)...
----------
Total Investments--96.5%
(cost $30,649,530; Note 30,083,366
4)......................
Other assets in excess of
liabilities--3.5%....... 1,105,229
----------
Net Assets--100%.......... $31,188,595
----------
----------
</TABLE>
- ------------------
Portfolio securities are classified according to the
securities currency
denomination.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
28
<PAGE>
<TABLE>
Total Return Bond Portfolio
Portfolio of Investments
December 31, 1997
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
LONG-TERM
INVESTMENTS--89.1%
Corporate Bonds--14.9%
Airlines--2.6%
United Airlines, Inc.,
Baa1 $ 1,000 10.85%, 2/19/15....... $ 1,331,980
------------
Banking--1.0%
Kansallis Osake Pankki, (Finland),
A3 500 8.651%, 12/29/49...... 511,630
------------
Energy--2.2%
California Energy Co.,
Inc.,
Ba1 1,000 9.875%, 6/30/03....... 1,084,570
------------
Financial Services--2.1%
Heller Financial,
Inc.,
A2 800 6.25%, 1/15/99........ 799,395
PaineWebber Group,
Inc.,
Baa1 250 6.75%, 2/1/06......... 249,315
------------
1,048,710
------------
Industrials--2.0%
TCI Communications,
Inc.,
Ba1 1,000 7.25%, 6/15/99........ 1,011,470
------------
Tobacco--2.0%
RJR Nabisco, Inc.,
Baa3 1,000 8.00%, 7/15/01........ 1,032,990
------------
Utilities--3.0%
El Paso Electric Co.,
Ba3 500 7.25%, 2/1/99......... 502,345
Niagara Mohawk Power
Corp.,
Ba3 1,000 6.875%, 3/1/01........ 1,007,100
------------
1,509,445
------------
Total corporate bonds
(cost $7,402,446)... 7,530,795
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
U.S. Government Agency Mortgage
Backed Securities--52.0%
Federal Home Loan
Mortgage Corp.,
6.50%, 9/15/18 -
$ 4,720 5/15/21............. $ 3,190,005
3,500 7.00%, 1/1/99......... 3,530,625
1,048 7.945%, 1/1/24........ 1,095,049
23 9.25%, 1/1/10......... 24,115
Federal National Mortgage Assn.,
1,145 6.671%, 3/1/26........ 1,165,760
1,986 7.178%, 1/1/20........ 2,044,541
11 8.50%, 4/1/99......... 11,467
Government National
Mortgage Assn.,
6.50%, 2/20/26 -
4,181 7/20/27............. 4,272,953
7.00%, 2/20/17 -
3,793 9/20/25............. 3,888,297
525 7.375%, 6/20/23....... 541,159
5,825 7.50%, 12/15/99....... 5,966,955
Resolution Trust
Corp.,
180 6.95%, 6/25/23........ 180,376
115 8.35%, 6/25/29........ 116,439
198 9.25%, 6/25/23........ 199,506
------------
Total U.S. Gov't.
agency
mortgage backed
securities
(cost
$25,946,150)........ 26,227,247
------------
Foreign Securities--6.6%
Petroleas Mexicano (Mexico),
Ba2 1,000DD 6.71875%, 3/8/99...... 990,000
Bundesrepublik Deut
(Germany)
Aaa DM3,900 6.50%, 7/4/27......... 2,338,807
------------
Total foreign
securities
(cost $3,271,742)... 3,328,807
------------
Collateralized Mortgage
Obligations--3.1%
American Housing Trust
1,
Senior Mortgage Pass
Through Certificate,
Series 1-5 Class A,
Aaa $ 20 8.625%, 8/25/18....... 20,483
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
29
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Total Return Bond Portfolio
(cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
Collateralized Mortgage
Obligations (cont'd.)
Champion Home Loan Equity,
Series 1995, Class A2-3,
Aaa $ 1,009 DD 8.57%, 2/25/28........ $ 1,027,549
Countrywide
Collateralized
Mortgage Obligation,
Aa1 274 DD 8.16%, 11/25/24....... 280,750
PaineWebber Mortgage
Acceptance Corp.,
Aaa 138 7.00%, 10/25/23....... 138,471
Sears Savings Bank,
Series 1992A Class A
Aaa 67 DD 8.66%, 5/25/32........ 67,266
------------
Total collateralized
mortgage
obligations
(cost $1,536,886)... 1,534,519
------------
U.S. Government Securities--12.5%
United States Treasury
Notes,
706 3.625%, 7/15/02....... 702,727
United States Treasury
Bonds,
200 6.00%, 2/15/26........ 199,750
3,700 6.50%, 11/15/26....... 3,949,750
1,300 6.75%, 8/15/26........ 1,431,222
------------
Total U.S. Government
Securities
(cost $5,859,520)... 6,283,449
------------
Total long-term
investments
(cost
$44,016,744)........ 44,904,817
------------
SHORT-TERM
INVESTMENTS--34.1%
Corporate Bonds--30.4%
Banking--2.0%
Advanta National Bank,
Baa3 1,000 5.98%, 2/10/98........ 999,060
------------
Communications--2.7%
BellSouth
Telecommunications,
Inc.,
P1 1,400 5.73%, 2/20/98........ 1,388,858
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Financial Services--14.2%
Du Pont (E.I.) De Nemours & Co.,
P1 $ 400 5.74%, 2/13/98........ $ 397,258
P1 200 5.83%, 1/28/98........ 199,125
Ford Motor Credit
Corp.,
P1 2,000 5.54%, 1/7/98......... 1,998,153
General Electric
Capital Corp.,
P1 600 5.63%, 1/23/98........ 597,936
General Motors
Acceptance Corp.,
P1 300 5.79%, 1/21/98........ 299,035
IBM Credit Corp.,
P1 1,600 5.60%, 1/15/98........ 1,596,516
KFW International Finance, Inc.,
P1 400 5.73%, 2/2/98......... 397,963
New Center Asset
Trust,
P1 1,700 5.72%, 1/23/98........ 1,694,057
------------
7,180,043
------------
Miscellaneous--0.9%
PDV America, Inc.,
Baa3 450 7.25%, 8/1/98......... 452,241
------------
Telecommunication Services--4.0%
AT&T Corp.,
Baa3 2,000 5.955%, 1/23/98....... 2,000,080
------------
Total corporate bonds
(cost
$12,023,006)........ 12,020,282
------------
Foreign Securities--9.0%
Banco Latinoamericano De Expor,
Baa2 300 5.90%, 3/31/98........ 299,550
Baa2 3,000 5.95%, 2/27/98........ 2,997,300
Caisse D
Amortissement,
P1 500 5.75%, 1/5/98......... 499,680
Canadian Government
Treasury Bills,
P1 300 5.69%, 2/9/98......... 298,151
P1 500 5.77%, 1/8/98......... 499,439
------------
Total foreign
securities
(cost $4,594,120)... 4,594,120
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
30
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
U.S. Government Securities--0.4%
United States Treasury
Bills,
$ 120 D 5.02%, 2/5/98......... $ 119,415
35 D 5.085%, 2/5/98........ 34,827
15 D 5.13%, 2/5/98......... 14,925
30 D 5.19%, 3/12/98........ 29,697
------------
198,864
------------
Total U.S. Government
Securities
(cost $198,864)..... 198,864
------------
Repurchase Agreement--0.8%
393 State Street Bank & Trust Co.,
2.00%, due 1/2/98 in
the amount of
$393,044 (cost
$393,000; value of
collateral including
accrued interest is
$400,941)........... 393,000
------------
Total short-term
investments
(cost
$17,208,990)........ 17,206,266
------------
Total Investments--123.2%
(cost $61,225,734;
Note 4)............. 62,111,083
Liabilities in excess
of other
assets--(23.2%)..... (11,700,301)
------------
Net Assets--100%...... $ 50,410,782
------------
------------
</TABLE>
- ---------------
D Pledged as initial margin on financial futures
contracts.
DD Rate shown reflects current rate on variable
rate
instrument.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
31
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
LONG-TERM
INVESTMENTS--68.3%
Corporate Bonds--16.1%
Airlines--2.1%
United Airlines,
Inc.,
Baa1 $ 1,500 10.85%, 2/19/15...... $ 1,997,970
------------
Financial Services--1.6%
Heller Financial,
Inc.,
A2 1,500 6.25%, 1/15/99....... 1,498,866
------------
Industrials--2.7%
TCI Communications,
Inc.,
Ba1 2,500 6.82%, 9/15/10....... 2,508,175
------------
Tobacco--2.0%
RJR Nabisco, Inc.,
Baa3 1,250 8.00%, 7/15/01....... 1,291,237
Baa3 600 8.625%, 12/1/02...... 638,754
------------
1,929,991
------------
Utilities--7.7%
California Energy
Co., Inc.,
Ba2 2,000 9.875%, 6/30/03...... 2,169,140
Long Island Lighting
Co.,
Ba3 1,535 7.30%, 7/15/99....... 1,555,339
Niagara Mohawk Power
Corp.,
Ba3 2,000 6.875%, 3/1/01....... 2,014,200
Texas-New Mexico
Power Company,
Ba3 1,500 12.50%, 1/15/99...... 1,584,270
------------
7,322,949
------------
Total corporate bonds
(cost
$15,034,794)....... 15,257,951
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
U.S. Government Agency Mortgage
Backed Securities--34.8%
Federal Home Loan
Mortgage Corp.,
$ 154 6.00%, 4/1/24........ $ 149,156
6.50%, 9/15/18-
2,849 12/15/21 I/O....... 372,643
8,300 7.00%, 1/1/99........ 8,372,625
115 9.25%, 1/1/10........ 121,780
Federal National
Mortgage Assn.,
188 6.19%, 12/1/30....... 188,287
2,289 6.671%, 3/1/26....... 2,331,520
1,060DD 6.75%, 8/1/24........ 1,078,761
1,641DD 7.765%, 8/1/25....... 1,715,658
25 8.50%, 7/1/99........ 24,844
36 8.50%, 4/1/99........ 35,984
Government National
Mortgage Assn.,
2,176DD 6.50%, 2/20/26....... 2,229,626
1,262DD 6.875%, 10/20/24..... 1,298,570
1,290DD 7.00%, 1/20/24....... 1,327,086
7.375%, 5/20/23 -
2,771DD 6/20/23............ 2,851,697
9,475 7.50%, 12/15/99...... 9,705,906
Resolution Trust
Corp.,
Aa2 284DD 6.95%, 6/25/23....... 285,000
AAAPoundPound 577 8.35%, 6/25/29....... 582,196
Baa2 395 9.25%, 6/25/23....... 399,016
------------
Total U.S. Government
agency mortgage
backed securities
(cost
$32,732,499)....... 33,070,355
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
32
<PAGE>
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
Collateralized Mortgage
Obligations--11.0%
Champion Home Loan
Equity, Series
1995,
Class A2-3,
AAAPoundPound $ 1,513 8.57%, 2/25/28....... $ 1,541,322
Countrywide
Collateralized
Mortgage
Obligation,
Aaa 628 6.75%, 2/25/24....... 626,679
Aa1 274 8.16%, 11/25/24...... 280,750
Federal National
Mortgage
Association
Guaranteed
Certificate, Remic
Trust 1997-1, Class
A,
2,508 6.50%, 2/18/04....... 2,527,463
Government National
Mortgage Assn.,
Remic Trust 1995-2,
Class Kq,
3,000 8.50%, 3/20/25....... 3,320,610
PaineWebber Mortgage
Acceptance Corp.,
Aaa 277 7.00%, 10/25/23...... 276,942
Residential Asset
Securities Corp.,
Series 1996 Ks4,
Class A2,
Aaa 1,730 5.9875%, 10/25/27.... 1,732,410
Sears Savings Bank,
Series 1992-A,
Class A,
Aaa 192 8.66%, 5/25/32....... 193,912
------------
Total collateralized
mortgage
obligations
(cost
$10,331,416)....... 10,500,088
------------
U.S. Government Securities--1.5%
United States Treasury Notes,
1,413 3.625%, 7/15/02
(cost $1,405,994).... 1,405,453
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Foreign Government Obligation--4.9%
Deutschland Republic,
Series 1997,
Aaa DM 7,800 6.50%, 7/4/27
(cost $4,649,094).... $ 4,677,615
------------
Total long-term
investments
(cost
$64,153,797)....... 64,911,462
------------
SHORT-TERM
INVESTMENTS--49.3%
Collateralized Mortgage
Obligation--4.7%
New Center Asset
Trust,
P1 US$4,500 5.71%, 1/20/98
(cost $4,486,439).... 4,485,774
------------
Corporate Bonds--18.9%
A T & T Capital
Corp.,
Baa3 4,000 6.38%, 8/28/98....... 4,010,400
Baa3 4,000 5.955%, 1/23/98...... 4,000,160
Advanta National
Bank,
Baa3 4,000 5.98%, 2/10/98....... 3,996,240
Paine Webber Group,
Inc.,
Baa1 2,000 6.07%, 3/6/98........ 2,000,600
PDV America, Inc.,
Baa3 1,950 7.25%, 8/1/98........ 1,959,711
Salomon, Inc.,
A2 2,000 6.47%, 3/19/98....... 2,001,860
------------
Total corporate bonds
(cost
$17,954,678)....... 17,968,971
------------
Corporate Notes--22.2%
BellSouth
Telecommunications,
Inc.,
P1 500 5.78%, 1/29/98....... 497,752
Caisse
D'Amortissement,
P1 600 5.72%, 2/5/98........ 596,663
P1 1,800 5.75%, 1/5/98........ 1,798,850
Canadian Wheat Board,
P1 1,800 5.77%, 1/13/98....... 1,796,538
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
33
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
Corporate Notes--(cont'd.)
Du Pont (E. I.) De
Nemours & Co.,
P1 $ 600 5.74%, 2/13/98....... $ 595,886
First USA Bank,
Aa2 5,000 6.16%, 3/31/98....... 5,000,700
Ford Motor Credit
Corp.,
P1 4,000 5.54%, 1/7/98........ 3,996,085
General Electric
Capital Corp.,
P1 2,100 5.55%, 1/21/98....... 2,093,094
P1 1,200 5.89%, 1/22/98....... 1,195,877
International
Business
Machines Corp.,
P1 200 5.82%, 1/16/98....... 199,515
KFW International
Finance Inc.,
P1 3,300 5.60%, 1/9/98........ 3,295,893
------------
Total corporate notes
(cost
$21,066,348)....... 21,066,853
------------
Foreign Government
Obligation--2.2%
Canadian Government
Treasury Bills,
A1 2,100 5.72%, 1/30/98
(cost $2,090,324).... 2,090,324
------------
U.S. Government Securities--0.3%
United States
Treasury Bills,
70 D 5.02%, 2/5/98........ 69,642
55 D 5.085%, 2/5/98....... 54,718
25 D 5.13%, 2/5/98........ 24,872
10 D 5.16%, 2/5/98........ 9,949
20 D 5.175%, 4/16/98...... 19,697
140 D 5.19%, 3/12/98....... 138,606
------------
Total U.S. Government
securities
(cost $317,497).... 317,484
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
Repurchase Agreement--1.0%
State Street Bank &
Trust Co.,
$ 925,000
$ 925 2.00%, due 1/2/98 in
the amount of
$925,103 (cost
$925,000; value of
collateral including
accrued interest is
$974,186)...........
------------
Total short-term
investments
(cost
$46,840,286)........ 46,854,406
------------
Total Investments--117.6%
(cost $110,994,083;
Note 4)............. 111,765,868
Liabilities in excess
of other
assets--(17.6%)..... (16,695,090)
------------
Net Assets--100%...... $ 95,070,778
------------
------------
</TABLE>
- ---------------
I/O--Interest Only Security.
PoundPound Standard & Poor's Rating.
D Pledged as initial margin on futures contracts.
DD Rate shown reflects current rate on variable
rate
instrument.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
34
<PAGE>
<TABLE>
Mortgage Backed Securities
Portfolio
Portfolio of Investments
December 31, 1997
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--97.8%
Collateralized Mortgage
Obligations--30.5%
Federal Home Loan Mortgage
Corp.,
$ 850 4.25%, 12/15/21, PAC...... $ 728,339
374 5.25%, 12/15/22, PAC...... 358,151
221 5.50%, 8/15/21, PAC....... 206,841
350 5.80%, 8/15/19, PAC....... 338,734
100 5.95%, 6/15/19, PAC....... 99,218
160 6.00%, 5/15/22............ 158,499
3,011 6.00%, 5/15/08 - 5/15/23, 2,930,630
PAC.....................
500 6.50%, 8/15/06, PAC....... 502,655
110 7.00%, 3/15/23, PAC....... 114,606
6,618 7.50%, 6/15/22, PAC I/O... 850,971
500 8.00%, 12/15/06, PAC...... 541,715
1,421 8.00%, 8/15/04 - 1,496,015
7/15/21.................
188 9.00%, 10/15/20........... 199,935
34 10.00%, 6/15/19, PAC...... 34,488
Federal National Mortgage
Assn.,
1,216 5.00%, 3/25/21............ 1,114,168
1,532 5.941%, 1/25/09........... 1,522,967
350 6.00%, 4/25/08, PAC....... 345,849
573 6.00%, 10/25/21 - 539,336
10/25/22................
800 6.25%, 1/25/09, PAC....... 792,000
2,595 6.50%, 2/25/06 - 12/25/23, 2,573,982
PAC.....................
361 6.50%, 12/25/19 - 351,472
4/25/22.................
3,769 7.00%, 9/25/19, PAC I/O... 353,624
954 7.385%, 3/25/21........... 988,065
380 7.50%, 5/25/07............ 402,884
300 8.00%, 8/25/06, PAC....... 310,311
189 8.00%, 12/25/21........... 207,631
600 8.50%, 7/25/18 - 2/25/20, 636,351
PAC.....................
582 8.50%, 6/25/21............ 612,746
First Boston Mortgage
Securities,
1,098 Zero Coupon, 4/25/17, 854,848
P/O.....................
1,098 8.985%, 4/25/17, I/O...... 288,831
First Union-Lehman
Brothers
Commerical Mortgage,
1,000 6.60%, 11/18/29........... 1,005,937
Salomon Brothers Mortgage Securities,
419 6.00%, 12/25/11........... 412,889
----------
Total collateralized
mortgage
obligations
(cost $21,853,483)...... 21,874,688
----------
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
U.S. Government Agency Mortgage
Pass-Through Obligations--65.4%
Federal Home Loan Mortgage
Corp.,
$ 485 6.50%, 2/01/04............. $ 486,517
6,458 7.00%, 2/01/99 - 6,583,182
12/01/25.................
22 7.25%, 7/01/06............. 22,749
239 7.50%, 3/01/08............. 245,631
119 8.25%, 12/01/05 - 125,155
5/01/08..................
429 8.50%, 6/01/03 - 7/01/21... 451,647
145 8.75%, 12/01/08............ 152,893
1,450 9.00%, 1/01/02 - 3/01/11... 1,525,296
39 10.00%, 1/01/04............ 41,124
49 10.50%, 11/01/19........... 54,298
66 11.50%, 3/01/16............ 74,556
44 12.75%, 11/01/13........... 50,858
27 13.25%, 5/01/13............ 31,170
44 14.00%, 6/01/11............ 53,371
Federal National Mortgage
Assn.,
796 7.00%, 12/01/00 - 802,088
7/01/25..................
423 7.50%, 2/01/20............. 438,972
206 7.75%, 10/01/19............ 214,713
17 8.00%, 3/01/07 - 6/01/07... 17,814
207 8.50%, 6/01/10............. 215,914
275 9.75%, 1/01/11............. 293,677
Government National Mortgage Assn.,
725 6.50%, 9/15/23............. 719,374
13,277 7.00%, 5/15/17 - 9/15/22... 13,431,174
8,514 7.50%, 8/15/11 - 8,761,401
12/20/23.................
3,049 8.00%, 1/15/08 - 8/15/22... 3,181,151
1,341 8.25%, 6/20/17 - 7/20/17... 1,439,997
890 8.50%, 3/15/05 - 945,820
11/15/21.................
4,279 9.00%, 5/20/05 - 1/15/20... 4,612,861
1,413 9.50%, 9/15/02 - 1/15/21... 1,529,266
1 13.00%, 2/15/11............ 1,128
108 13.50%, 6/15/10 - 130,977
10/15/12.................
100 14.00%, 6/15/11 - 120,956
4/15/12..................
48 16.00%, 4/15/12 - 58,679
5/15/12..................
----------
Total U.S. Government 46,814,409
agency
mortgage pass-through
obligations
(cost $44,430,901).......
----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
35
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Mortgage Backed Securities
Portfolio (cont'd)
Portfolio of Investments
December 31, 1997
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
U.S. Government Securities--1.9%
United States Treasury
Bonds,
$ 1,000 8.75%, 5/15/17 $ 1,311,090
(cost $1,302,309)........
------------
Total long-term investments
(cost $67,586,693)....... 70,000,187
------------
SHORT-TERM INVESTMENTS--1.8%
Repurchase Agreement--1.8%
1,304 PaineWebber Inc., 1,304,000
6.60%, due 1/2/98 in the
amount of $1,304,478
(cost $1,304,000; the
value of the collateral
including accrued inter-
est is $1,339,494).......
------------
U.S. Government Agency Mortgage
Pass-Through Obligations
Federal Home Loan Mortgage
Corp.
2 6.50%, 1/01/98............. 1,569
------------
Total short-term
investments
(cost $1,305,599)........ 1,305,569
------------
Total Investments--99.6%
(cost $68,892,292; Note 71,305,756
4).......................
Other assets in excess of
liabilities--0.4%........ 289,751
------------
Net Assets--100%........... $ 71,595,507
------------
------------
</TABLE>
- ---------------
I/O--Interest Only Security.
PAC--Planned Amortization Class.
P/O--Principal Only.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
36
<PAGE>
<TABLE>
U.S. Government Money Market
Portfolio
Portfolio of Investments
December 31, 1997
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
Federal Farm Credit Bank--4.7%
$ 2,000 5.70%, 11/3/98............. $ 1,998,872
------------
Federal Home Loan Bank--21.2%
5,000 5.50%, 2/6/98.............. 4,972,500
2,000 5.81%, 11/4/98............. 1,999,072
2,000 5.80%, 12/18/98............ 1,999,806
------------
8,971,378
------------
Federal National Mortgage
Association--11.8%
5,000 5.52%, 2/19/98............. 4,962,433
------------
Student Loan Marketing Association--4.7%
2,000 5.82%, 9/16/98............. 1,999,378
------------
Repurchase Agreements--83.5%
8,841 Aubrey Lanston, 6.50%, due 8,841,000
1/2/98 in the amount of
$8,844,193 (cost
$8,841,000; value of
collateral including ac-
crued interest -
$9,021,996)..............
8,842 Swiss Bank Corp., 6.55%, 8,842,000
due 1/2/98 in the amount
of $8,845,218 (cost
$8,842,000; value of
collateral including ac-
crued interest -
$9,016,757)..............
8,841 Lehman Brothers Hldgs., 8,841,000
Inc., 6.57%, due 1/2/98
in the amount of
$8,844,227 (cost
$8,841,000; value of
collateral including
accrued interest -
$9,521,185)..............
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
$ 8,842 Paribas, 6.75%, due 1/2/98 $8,842,000
in the amount of
$8,845,316 (cost
$8,842,000; value of
collateral including
accrued interest -
$9,020,156)..............
----------
35,366,000
----------
Total Investments--125.9%
(amortized cost 53,298,061
$53,298,061*)............
Liabilities in excess of (10,972,529)
other
assets--(25.9%)..........
----------
Net Assets--100%........... $42,325,532
----------
----------
</TABLE>
- ---------------
* Federal income tax basis of portfolio securities is the
same as for financial
reporting purposes.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
37
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Assets and
Liabilities
December 31, 1997
<TABLE>
<CAPTION>
LARGE
CAPITALIZATION LARGE CAPITALIZATION SMALL
CAPITALIZATION
GROWTH
PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO
<S> <C>
<C> <C>
ASSETS
Investments, at value* $245,691,526
$275,953,582 $168,710,427
Cash --
8,754 --
Foreign currency, at value
(cost $825,817; $67) --
- -- --
Receivable for Fund shares sold 418,150
490,969 215,415
Receivable for investments sold --
1,408,733 229,432
Dividends and interest receivable 85,499
575,792 32,649
Deferred expenses and other assets 5,280
5,483 3,639
Due from broker - variation margin --
- -- --
Forward currency contracts-net amount
receivable
from counterparties --
- -- --
Total assets 246,200,455
278,443,313 169,191,562
LIABILITIES
Payable for investments purchased 325,634
1,322,800 1,850,185
Payable for Fund shares reacquired 1,694,937
1,836,843 1,259,217
Accrued expenses and other liabilities 216,395
37,490 113,804
Dividends payable --
- -- --
Withholding taxes payable --
7,362 --
Deferred trustees' fees 7,397
7,397 7,397
Due to Manager 61,512
138,222 62,823
Forward currency contracts-net amount
payable
to counterparties --
- -- --
Total liabilities 2,305,875
3,350,114 3,293,426
NET ASSETS $243,894,580
$275,093,199 $165,898,136
Net assets were comprised of:
Shares of beneficial interest, at par $ 17,954
$ 16,974 $ 10,654
Paid-in capital in excess of par 180,283,183
181,034,352 128,592,745
180,301,137
181,051,326 128,603,399
Under (over) distribution of net
investment
income --
470,031 --
Accumulated net realized gains
(losses) (3,756,273)
4,220,043 3,957,309
Net unrealized
appreciation/depreciation 67,349,716
89,351,799 33,337,428
Net assets, December 31, 1997 $243,894,580
$275,093,199 $165,898,136
Shares of beneficial interest issued
and outstanding 17,954,643
16,973,575 10,653,620
Net asset value, offering price and
redemption price per share $13.58
$16.21 $15.57
*Identified cost of investments. $178,341,810
$186,601,783 $135,372,999
<CAPTION>
SMALL
CAPITALIZATION
VALUE PORTFOLIO
<S> <C>
ASSETS
Investments, at value* $164,325,079
Cash 36,542
Foreign currency, at value
(cost $825,817; $67) --
Receivable for Fund shares sold 237,814
Receivable for investments sold 557,099
Dividends and interest receivable 130,567
Deferred expenses and other assets 3,151
Due from broker - variation margin --
Forward currency contracts-net amount
receivable
from counterparties --
Total assets 165,290,252
LIABILITIES
Payable for investments purchased 1,000,337
Payable for Fund shares reacquired 665,896
Accrued expenses and other liabilities 161,516
Dividends payable --
Withholding taxes payable --
Deferred trustees' fees 7,397
Due to Manager 40,937
Forward currency contracts-net amount
payable
to counterparties --
Total liabilities 1,876,083
NET ASSETS $163,414,169
Net assets were comprised of:
Shares of beneficial interest, at par $ 9,336
Paid-in capital in excess of par 121,361,129
121,370,465
Under (over) distribution of net
investment
income --
Accumulated net realized gains
(losses) 2,187,826
Net unrealized
appreciation/depreciation 39,855,878
Net assets, December 31, 1997 $163,414,169
Shares of beneficial interest issued
and outstanding 9,335,840
Net asset value, offering price and
redemption price per share $17.50
*Identified cost of investments. $124,469,201
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
38
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL TOTAL
RETURN INTERMEDIATE-TERM MORTGAGE BACKED
EQUITY PORTFOLIO BOND PORTFOLIO BOND
PORTFOLIO BOND PORTFOLIO SECURITIES PORTFOLIO
<S> <C> <C>
<C> <C>
$237,235,811 $ 30,083,366 $
62,111,083 $ 111,765,868 $ 71,305,756
98,964 57
1,936 3,334 15,649
811,414 59
- -- -- --
343,654 95,022
209,526 94,744 124,808
-- --
2,964,609 -- 3,613,500
639,761 947,331
538,401 1,339,288 507,703
5,455 15,425
1,218 2,143 1,776
-- --
33,750 87,126 --
-- 140,618
33,189 159,371 --
239,135,059 31,281,878
65,893,712 113,451,874 75,569,192
242,521 --
15,357,484 17,963,828 3,628,969
764,526 27,817
45,171 255,862 163,054
95,811 37,798
51,664 42,620 124,454
-- 8,145
13,785 14,152 22,645
34,828 357
- -- -- --
7,397 5,710
7,397 7,397 7,397
139,078 13,456
7,429 36,201 27,166
-- --
- -- 61,036 --
1,284,161 93,283
15,482,930 18,381,096 3,973,685
$237,850,898 $31,188,595
$50,410,782 $95,070,778 $71,595,507
16,662
$ $ 3,401 $
4,773 $ 9,128 $ 6,850
202,100,393 31,941,741
49,095,102 93,887,483 70,201,506
202,117,055 31,945,142
49,099,875 93,896,611 70,208,356
316,826 (314,807)
223,566 218,646 57,342
(70,928) (793)
159,106 (47,889) (1,083,655)
35,487,945 (440,947)
928,235 1,003,410 2,413,464
$237,850,898 $31,188,595
$50,410,782 $95,070,778 $71,595,507
16,662,216 3,401,148
4,772,691 9,127,761 6,849,808
$14.27 $9.17
$10.56 $10.42 $10.45
$201,720,391 $30,649,530
$61,225,734 $110,994,083 $68,892,292
<CAPTION>
INTERNATIONAL U.S. GOVERNMENT MONEY
EQUITY PORTFOLIO MARKET PORTFOLIO
<S> <C>
$237,235,811 $53,298,061
98,964 --
811,414 --
343,654 1,901,790
-- --
639,761 75,242
5,455 25,281
-- --
-- --
239,135,059 55,300,374
242,521 --
764,526 12,940,382
95,811 12,277
-- 4,357
34,828 --
7,397 7,397
139,078 10,429
-- --
1,284,161 12,974,842
$237,850,898 $42,325,532
16,662
$ $ 42,325
202,100,393 42,283,207
202,117,055 42,325,532
316,826 --
(70,928) --
35,487,945 --
$237,850,898 $42,325,532
16,662,216 42,325,532
$14.27 $1.00
$201,720,391 $53,298,061
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
39
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Operations
For The Year Ended December
31, 1997
<TABLE>
<CAPTION>
LARGE
CAPITALIZATION LARGE CAPITALIZATION SMALL
CAPITALIZATION
GROWTH
PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO
<S> <C>
<C> <C>
NET INVESTMENT INCOME
- ------------------------------------------------------------
- ---------------------------------------------------
Income
Interest $ 444,922
$ 205,036 $ 357,084
- ------------------------------------------------------------
- ---------------------------------------------------
Dividends 1,302,808
6,496,765 318,722
- ------------------------------------------------------------
- ---------------------------------------------------
Less: Foreign withholding taxes (507)
(51,013) (1,419)
- ------------------------------------------------------------
- ---------------------------------------------------
Total income 1,747,223
6,650,788 674,387
- ------------------------------------------------------------
- ---------------------------------------------------
Expenses
Management fee 1,453,397
1,521,474 939,417
- ------------------------------------------------------------
- ---------------------------------------------------
Custodian's fees and expenses 100,000
130,000 97,000
- ------------------------------------------------------------
- ---------------------------------------------------
Transfer agent's fees and expenses 90,700
91,500 90,700
- ------------------------------------------------------------
- ---------------------------------------------------
Reports to shareholders 50,000
30,000 40,000
- ------------------------------------------------------------
- ---------------------------------------------------
Registration fees 24,000
21,000 30,000
- ------------------------------------------------------------
- ---------------------------------------------------
Audit fee 13,500
13,500 13,500
- ------------------------------------------------------------
- ---------------------------------------------------
Legal fees and expenses 7,000
7,000 7,000
- ------------------------------------------------------------
- ---------------------------------------------------
Amortization of organization expenses 5,786
5,786 5,786
- ------------------------------------------------------------
- ---------------------------------------------------
Trustees' fees and expenses 2,700
2,700 2,700
- ------------------------------------------------------------
- ---------------------------------------------------
Insurance 5,400
5,500 3,000
- ------------------------------------------------------------
- ---------------------------------------------------
Miscellaneous 7,393
6,911 1,992
- ------------------------------------------------------------
- ---------------------------------------------------
Total expenses 1,759,876
1,835,371 1,231,095
- ------------------------------------------------------------
- ---------------------------------------------------
Net investment income (loss) (12,653)
4,815,417 (556,708)
- ------------------------------------------------------------
- ---------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
- ------------------------------------------------------------
- ---------------------------------------------------
Net realized gain (loss) on:
Investment transactions 24,436,720
25,006,548 24,119,898
- ------------------------------------------------------------
- ---------------------------------------------------
Financial futures contracts --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Foreign currency transactions --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Options written --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Short sale transactions --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Total net realized gain (loss) 24,436,720
25,006,548 24,119,898
- ------------------------------------------------------------
- ---------------------------------------------------
Net change in unrealized
appreciation/depreciation on:
Investments 20,104,947
35,519,278 5,445,586
- ------------------------------------------------------------
- ---------------------------------------------------
Financial futures contracts --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Foreign currencies --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Options written --
- -- --
- ------------------------------------------------------------
- ---------------------------------------------------
Net change in unrealized
appreciation/depreciation 20,104,947
35,519,278 5,445,586
- ------------------------------------------------------------
- ---------------------------------------------------
Net gain (loss) 44,541,667
60,525,826 29,565,484
- ------------------------------------------------------------
- ---------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 44,529,014
$ 65,341,243 $ 29,008,776
- ------------------------------------------------------------
- ---------------------------------------------------
<CAPTION>
SMALL
CAPITALIZATION
VALUE PORTFOLIO
<S> <C>
NET INVESTMENT INCOME
- ------------------------------------------------------------
- -----------------------
Income
Interest $ 261,413
- ------------------------------------------------------------
- --------------------------------------------
Dividends 1,569,549
- ------------------------------------------------------------
- ---------------------------------------------------
Less: Foreign withholding taxes (1,459)
- ------------------------------------------------------------
- ---------------------------------------------------
Total income 1,829,503
- ------------------------------------------------------------
- ---------------------------------------------------
Expenses
Management fee 864,964
- ------------------------------------------------------------
- ---------------------------------------------------
Custodian's fees and expenses 121,000
- ------------------------------------------------------------
- ---------------------------------------------------
Transfer agent's fees and expenses 87,100
- ------------------------------------------------------------
- ---------------------------------------------------
Reports to shareholders 36,000
- ------------------------------------------------------------
- ---------------------------------------------------
Registration fees 29,000
- ------------------------------------------------------------
- ---------------------------------------------------
Audit fee 13,500
- ------------------------------------------------------------
- ---------------------------------------------------
Legal fees and expenses 7,000
- ------------------------------------------------------------
- ---------------------------------------------------
Amortization of organization expenses 5,786
- ------------------------------------------------------------
- ---------------------------------------------------
Trustees' fees and expenses 2,700
- ------------------------------------------------------------
- ---------------------------------------------------
Insurance 3,000
- ------------------------------------------------------------
- ---------------------------------------------------
Miscellaneous 3,814
- ------------------------------------------------------------
- ---------------------------------------------------
Total expenses 1,173,864
- ------------------------------------------------------------
- ---------------------------------------------------
Net investment income (loss) 655,639
- ------------------------------------------------------------
- ---------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
- ------------------------------------------------------------
- ---------------------------------------------------
Net realized gain (loss) on:
Investment transactions 17,387,992
- ------------------------------------------------------------
- ---------------------------------------------------
Financial futures contracts --
- ------------------------------------------------------------
- ---------------------------------------------------
Foreign currency transactions --
- ------------------------------------------------------------
- ---------------------------------------------------
Options written --
- ------------------------------------------------------------
- ---------------------------------------------------
Short sale transactions --
- ------------------------------------------------------------
- ---------------------------------------------------
Total net realized gain (loss) 17,387,992
- ------------------------------------------------------------
- ---------------------------------------------------
Net change in unrealized
appreciation/depreciation on:
Investments 18,899,607
- ------------------------------------------------------------
- ---------------------------------------------------
Financial futures contracts --
- ------------------------------------------------------------
- ---------------------------------------------------
Foreign currencies --
- ------------------------------------------------------------
- ---------------------------------------------------
Options written --
- ------------------------------------------------------------
- ---------------------------------------------------
Net change in unrealized
appreciation/depreciation 18,899,607
- ------------------------------------------------------------
- ---------------------------------------------------
Net gain (loss) 36,287,599
- ------------------------------------------------------------
- ---------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 36,943,238
- ------------------------------------------------------------
- ---------------------------------------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
40
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL TOTAL
RETURN INTERMEDIATE-TERM MORTGAGE BACKED
EQUITY PORTFOLIO BOND PORTFOLIO BOND
PORTFOLIO BOND PORTFOLIO SECURITIES PORTFOLIO
<S> <C> <C>
<C> <C>
$ 349,110 $ 2,034,266
$3,107,074 $ 6,065,580 $5,092,077
5,444,776 --
- -- -- --
(695,571) --
- -- -- --
5,098,315 2,034,266
3,107,074 6,065,580 5,092,077
1,718,754 175,813
216,559 430,089 322,907
325,000 132,000
111,000 112,000 167,000
90,700 32,900
35,400 39,800 46,100
38,000 69,000
19,000 32,000 33,000
54,000 20,000
22,000 28,000 30,000
20,000 13,500
13,500 13,500 13,500
7,000 12,000
7,000 7,000 7,000
5,786 10,625
5,786 5,786 5,786
2,700 2,700
2,700 2,700 2,700
5,600 900
1,100 2,100 1,200
10,171 4,215
5,011 3,362 3,549
2,277,711 473,653
439,056 676,337 632,742
2,820,604 1,560,613
2,668,018 5,389,243 4,459,335
26,063,922 (2,260,925)
548,283 461,094 361,589
-- --
216,225 867,924 (37,360)
(847,760) (734,948)
218,239 252,812 --
-- 26,759
12,577 22,494 35,962
-- --
- -- -- (162,734)
25,216,162 (2,969,114)
995,324 1,604,324 197,457
)
(1,041,388 (1,384,771)
476,476 457,886 1,448,008
-- --
201,250 316,875 --
(23,194) 504,241
(96,924) (2,383) --
-- --
- -- -- (15,119)
)
(1,064,582 (880,530)
580,802 772,378 1,432,889
24,151,580 (3,849,644)
1,576,126 2,376,702 1,630,346
26,972,184
$ $ (2,289,031)
$4,244,144 $ 7,765,945 $6,089,681
<CAPTION>
INTERNATIONAL U.S. GOVERNMENT MONEY
EQUITY PORTFOLIO MARKET PORTFOLIO
<S> <C>
$ 349,110 $ 2,093,304
5,444,776 --
(695,571) --
5,098,315 2,093,304
1,718,754 94,188
325,000 70,000
90,700 10,500
38,000 19,000
54,000 25,000
20,000 5,000
7,000 7,000
5,786 5,786
2,700 2,700
5,600 700
10,171 3,081
2,277,711 242,955
2,820,604 1,850,349
26,063,922 (469)
-- --
(847,760) --
-- --
-- --
25,216,162 (469)
)
(1,041,388 --
-- --
(23,194) --
-- --
)
(1,064,582 --
24,151,580 (469)
26,972,184
$ $ 1,849,880
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
41
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Changes in Net
Assets
<TABLE>
<CAPTION>
SMALL
CAPITALIZATION
LARGE
CAPITALIZATION LARGE CAPITALIZATION
GROWTH
GROWTH
PORTFOLIO VALUE PORTFOLIO
PORTFOLIO
---------------------
- ------- ---------------------------- ---------
- ---
Year Ended
Year Ended December
31, Year Ended December 31, December
31,
---------------------
- ------- ---------------------------- ---------
- ---
1997
1996 1997 1996 1997
<S> <C> <C>
<C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Operations
Net investment income (loss) $ (12,653) $
390,116 $ 4,815,417 $ 4,829,796 $
(556,708)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net realized gain (loss) on
investment and foreign currency
transactions 24,436,720
11,243,006 25,006,548 11,707,935
24,119,898
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net change in unrealized
appreciation/
depreciation of investments 20,104,947
27,653,840 35,519,278 20,366,798
5,445,586
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net increase (decrease) in net
assets
resulting from operations 44,529,014
39,286,962 65,341,243 36,904,529
29,008,776
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Dividends and Distributions
Dividends from net investment
income (46,217)
(329,698) (4,345,386) (4,829,796)
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Dividends in excess of net
investment
income (60,960)
- -- -- (435,227) --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Distributions from net
realized gains (31,971,788)
(23,349,943) (24,366,069) (9,766,690)
(21,977,874)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Tax return of capital distributions --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Total distributions (32,078,965)
(23,679,641) (28,711,455) (15,031,713)
(21,977,874)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Fund share transactions(a)
Net proceeds from shares sold 47,455,937
63,352,161 54,334,008 67,051,579
38,578,759
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 31,377,043
23,329,793 28,089,014 14,708,918
21,564,493
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Cost of shares reacquired (68,170,878)
(61,584,086) (71,665,460) (63,523,667)
(48,745,293)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net increase/(decrease) in net
assets from Fund share
transactions 10,662,102
25,097,868 10,757,562 18,236,830
11,397,959
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Total increase (decrease) 23,112,151
40,705,189 47,387,350 40,109,646
18,428,861
NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Beginning of year 220,782,429
180,077,240 227,705,849 187,596,203
147,469,275
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
End of year $243,894,580
$220,782,429 $275,093,199 $227,705,849
$165,898,136
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO
--
- --------------------------
Year Ended December 31,
--
- --------------------------
1996
1997 1996
<S> <C>
<C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Operations
Net investment income (loss) $ (445,756) $
655,639 $ 847,572
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net realized gain (loss) on
investment and foreign currency
transactions 16,882,644
17,387,992 10,384,665
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net change in unrealized
appreciation/
depreciation of investments 6,803,397
18,899,607 11,237,645
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net increase (decrease) in net
assets
resulting from operations 23,240,285
36,943,238 22,469,882
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Dividends and Distributions
Dividends from net investment
income --
(664,037) (837,683)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Dividends in excess of net
investment
income --
(94,907) --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Distributions from net
realized gains (16,337,409)
(17,432,911) (4,467,642)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Tax return of capital distributions --
- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Total distributions (16,337,409)
(18,191,855) (5,305,325)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Fund share transactions(a)
Net proceeds from shares sold 52,292,568
44,917,116 44,712,582
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 16,090,077
17,747,752 5,207,885
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Cost of shares reacquired (49,348,968)
(44,673,985) (38,007,600)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Net increase/(decrease) in net
assets from Fund share
transactions 19,033,677
17,990,883 11,912,867
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Total increase (decrease) 25,936,553
36,742,266 29,077,424
NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
Beginning of year 121,532,722
126,671,903 97,594,479
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
End of year $147,469,275
$163,414,169 $126,671,903
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
</TABLE>
(a) Fund share transactions are at $1 per share for the U.S.
Government Money
Market Portfolio.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
42
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
EQUITY BOND
TOTAL RETURN INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
BOND PORTFOLIO BOND PORTFOLIO
--------------------------- -----------------------
- ---- -------------------------- ------------------------
- ---
Year Ended December 31, Year Ended December
31, Year Ended December 31, Year Ended December
31,
--------------------------- -----------------------
- ---- -------------------------- ------------------------
- ---
1997 1996 1997 1996
1997 1996 1997 1996
<S> <C> <C> <C>
<C> <C> <C> <C>
$ 2,820,604 $ 3,913,497 $ 1,560,613 $
1,946,597 $ 2,668,018 $ 2,680,264 $ 5,389,243 $
4,651,788
25,216,162 11,814,979 (2,969,114)
(128,465) 995,324 (27,284) 1,604,324
53,044
)
(1,064,582 16,975,091 (880,530)
(34,527) 580,802 (293,217) 772,378
(394,193)
26,972,184 32,703,567 (2,289,031)
1,783,605 4,244,144 2,359,763 7,765,945
4,310,639
(2,820,604) (3,405,100) --
(812,023) (2,523,654) (2,614,993) (5,281,003)
(4,651,788)
)
(3,343,171 -- (227,344)
- -- -- -- --
(47,210)
)
(25,343,801 (9,899,724) (14,562)
(922,057) (465,731) (1,230,625) (1,471,335)
(1,051,696)
-- -- (1,320,129)
- -- -- -- --
- --
(31,507,576) (13,304,824) (1,562,035)
(1,734,080) (2,989,385) (3,845,618) (6,752,338)
(5,750,694)
355,674,205 354,553,935 10,444,049
18,342,835 14,859,623 20,202,045 29,443,555
44,780,207
30,918,137 13,089,510 1,488,888
1,705,126 2,845,116 3,603,260 6,439,182
5,507,246
(384,768,978) (338,076,828) (18,672,976)
(12,977,726) (17,766,511) (18,219,385) (42,217,583)
(25,580,092)
1,823,364 29,566,617 (6,740,039)
7,070,235 (61,772) 5,585,920 (6,334,846)
24,707,361
(2,712,028) 48,965,360 (10,591,105)
7,119,760 1,192,987 4,100,065 (5,321,239)
23,267,306
240,562,926 191,597,566 41,779,700
34,659,940 49,217,795 45,117,730 100,392,017
77,124,711
$237,850,898 $240,562,926 $31,188,595
$41,779,700 $50,410,782 $ 49,217,795 $ 95,070,778
$100,392,017
<CAPTION>
U.S. GOVERNMENT
MORTGAGE BACKED
MONEY
SECURITIES PORTFOLIO
MARKET PORTFOLIO
------------ -------------------------- ----------
- ---------------------
Year Ended December 31, Year
Ended December 31,
------------ -------------------------- ----------
- ---------------------
1997 1996 1997
1996
<S> <C> <C>
<C>
$ 4,459,335 $ 4,651,169 $
1,850,349 $ 859,961
197,457 327,178
(469) 2,578
1,432,889 (1,105,092 )
- -- --
6,089,681 3,873,255
1,849,880 862,539
(4,425,133) (4,503,951 )
(1,849,880) (862,539)
-- --
- -- --
-- --
- -- --
-- --
- -- --
(4,425,133) (4,503,951 )
(1,849,880) (862,539)
13,448,142 21,388,848
1,070,854,061 339,835,083
3,643,014 3,841,153
1,601,795 776,187
(21,027,273) (20,491,299 )
(1,057,527,680) (332,068,470)
(3,936,117) 4,738,702
14,928,176 8,542,800
(2,271,569) 4,108,006
14,928,176 8,542,800
73,867,076 69,759,070
27,397,356 18,854,556
$71,595,507 $73,867,076 $
42,325,532 $ 27,397,356
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
43
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
LARGE CAPITALIZATION
GROWTH PORTFOLIO
--------
- ------------------------------------------------------------
- --------
Year Ended December 31,
--------
- ------------------------------------------------------------
- --------
1997
1996 1995(e) 1994(e)
<S> <C>
<C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net asset value, beginning of period
$12.97 $12.13 $9.74
$9.91
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Income from investment operations
Net investment income (loss) -
- -(f) .02 .10
.10
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net realized and unrealized gains (losses)
on
investment transactions
2.61 2.33 2.41
(.16)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Total from investment
operations
2.61 2.35 2.51
(.06)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Less distributions
Dividends from net investment income
(.01) (.02) (.10)
(.10)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Distributions in excess of net
investment income -
- - -- (.01)
(.01)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Distributions from net realized gains
(1.99) (1.49) (.01)
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Total distributions
(2.00) (1.51) (.12)
(.11)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net asset value, end of period
$13.58 $12.97 $12.13
$9.74
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
TOTAL RETURN(d)
20.77% 21.09% 25.76%
(.68)%
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net assets, end of period (000)
$243,895 $220,782 $180,077
$142,072
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Average net assets (000)
$242,233 $202,736 $162,982
$129,687
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Ratios to average net assets
Expenses
.73% .82% .78%
.81%
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net investment income (loss)
(.01)% .19% .88%
1.08%
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Portfolio turnover rate
82% 65% 154%
24%
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Average commission rate per share $
.0560 $ .0572 $ .0578
N/A
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
<CAPTION>
January 5,
1993(a)
Through
December 31,
1993(e)
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net asset value, beginning of period $10.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Income from investment operations
Net investment income (loss) .07(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net realized and unrealized gains (losses)
on
investment transactions (.12)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Total from investment
operations (.05)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Less distributions
Dividends from net investment income (.04)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Distributions in excess of net
investment income --
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Distributions from net realized gains --
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Total distributions (.04)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net asset value, end of period $9.91
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
TOTAL RETURN(d) (.46)%
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net assets, end of period (000) $98,089
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Average net assets (000) $48,033
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Ratios to average net assets
Expenses
1.05%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Net investment income (loss)
.84%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Portfolio turnover rate 4%
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
Average commission rate per share N/A
- ------------------------------------------------------------
- ------------------------------------------------------------
- --------
</TABLE>
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidies.
(d) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment of
dividends and distributions.
Total return for periods of less than a full year are not
annualized.
(e) Calculated based upon average shares outstanding during
the period.
(f) Less than $.005 per share.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
44
<PAGE>
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
LARGE CAPITALIZATION
GROWTH
VALUE PORTFOLIO
PORTFOLIO
- ------------------------------------------------------------
- ------------------ -------------------------------------
- -------
January 5,
1993(a)
Year Ended December 31,
Through Year Ended December 31,
- ------------------------------------------------------------
- - December 31, -------------------------------------
- -------
1997 1996(e) 1995(e) 1994(e)
1993(e) 1997 1996 1995(e)
<S> <C> <C> <C>
<C> <C> <C> <C>
$13.97 $12.57 $10.02 $10.11
$10.00 $14.93 $14.15 $11.59
.31 .31 .33 .26
.21(c) (.05) (.02) .02
3.77 2.07 2.89 (.04)
.02 3.02 2.63 2.84
4.08 2.38 3.22 .22
.23 2.97 2.61 2.86
(.28) (.31) (.30) (.25)
(.11) -- -- (.02)
-- (.03) -- --
- -- -- -- --
(1.56) (.64) (.37) (.06)
(.01) (2.33) (1.83) (.28)
(1.84) (.98) (.67) (.31)
(.12) (2.33) (1.83) (.30)
$16.21 $13.97 $12.57 $10.02
$10.11 $15.57 $14.93 $14.15
29.80% 19.17% 32.08% 2.18%
2.29% 20.85% 18.88% 24.62%
$275,093 $227,706 $187,596 $142,219
$96,074 $165,898 $147,469 $121,533
$253,579 $208,898 $163,124 $128,865
$46,623 $156,570 $141,496 $107,649
%
.72 .77% .76% .81%
1.05%(b)(c) .79% .89% .85%
1.90% 2.33% 2.83% 2.66%
2.12%(b)(c) (.36)% (.32)% .12%
21% 22% 59% 6%
3% 106% 108% 120%
$ .0499 $ .0509 $ .0514 N/A
N/A $ .0596 $ .0590 $ .0586
<CAPTION>
January 5,
1993(a)
Through
December 31,
1994(e) 1993(e)
<S> <C>
$11.86 $10.00
.01 .01(c)
(.27) 1.86
(.26) 1.87
(.01) (.01)
-- --
-- --
(.01) (.01)
$11.59 $11.86
(2.19)% 18.66%
$96,462 $63,917
$87,403 $29,313
.93% 1.05%(c)
.10% .11%(c)
97% 72%
N/A N/A
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
45
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
VALUE
PORTFOLIO(e)
--------
- ------------------------------------------------------------
- ---------
Year Ended December 31,
--------
- ------------------------------------------------------------
- ---------
1997
1996 1995 1994
<S> <C>
<C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, beginning of period
$15.22 $13.07 $11.07
$12.72
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Income from investment operations
Net investment income (loss)
.08 .11 .14
.11
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net realized and unrealized gains (losses)
on
investment transactions
4.37 2.71 2.00
(1.49)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total from investment
operations
4.45 2.82 2.14
(1.38)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Less distributions
Dividends from net investment income
(.08) (.11) (.14)
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Distributions in excess of net
investment income
(.01) -- --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Distributions from net realized gains
(2.08) (.56) --
(.27)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Distributions in excess of net realized
gains
- -- -- --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Tax return of capital distributions
- -- -- --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total distributions
(2.17) (.67) (.14)
(.27)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, end of period
$17.50 $15.22 $13.07
$11.07
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
TOTAL RETURN(d)
29.98% 21.75% 19.21%
(11.03)%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, end of period (000)
$163,414 $126,672 $97,594
$84,163
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Average net assets (000)
$144,160 $110,564 $88,085
$83,891
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Ratios to average net assets
Expenses
.81% .92% 1.00%
.93%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net investment income (loss)
.45% .77% 1.14%
.88%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Portfolio turnover rate
36% 60% 110%
97%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Average commission rate per share $
.0600 $ .0610 $ .0561
N/A
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
<CAPTION>
January 5,
1993(a)
Through
December 31,
1993
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, beginning of period $10.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Income from investment operations
Net investment income (loss) (.01)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net realized and unrealized gains (losses)
on
investment transactions 3.19
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total from investment
operations 3.18
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Less distributions
Dividends from net investment income --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Distributions in excess of net
investment income --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Distributions from net realized gains (.46)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Distributions in excess of net realized
gains --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Tax return of capital distributions --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total distributions (.46)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, end of period $12.72
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
TOTAL RETURN(d) 31.86%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, end of period (000) $64,430
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Average net assets (000) $29,039
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Ratios to average net assets
Expenses
1.05%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net investment income (loss)
(.11)%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Portfolio turnover rate 112%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Average commission rate per share N/A
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
</TABLE>
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidies.
(d) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment of
dividends and distributions.
Total return for periods of less than a full year are not
annualized.
(e) Calculated based upon average shares outstanding during
the period.
(f) Less than $.005 per share.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
46
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL
INTERNATIONAL
BOND
EQUITY PORTFOLIO
PORTFOLIO
-----------------------------------------------------
- ------------------------------------ -----------------
- ------------
January 5,
1993(a)
Year Ended December 31,
Through Year Ended December 31,
-----------------------------------------------------
- ----------------- December 31, -----------------
- ------------
1997 1996 1995(e)
1994(e) 1993(e) 1997
1996
<S> <C> <C>
<C> <C> <C> <C>
$14.82 $13.64 $11.95
$13.09 $10.00 $10.17
$10.19
.21 .25 .17
.06 .07 .42 .51
1.32 1.79 1.67
(.01) 3.16 (1.00) (.08)
1.53 2.04 1.84
.05 3.23 (.58) .43
(.41) (.22) (.11)
(.01) (.01) -- (.21)
-- -- --
- -- -- (.06) --
(1.67) (.64) (.04)
(1.07) (.05) --(f)
(.24)
-- -- --
(.11) (.08) -- --
-- -- --
- -- -- (.36) --
(2.08) (.86) (.15)
(1.19) (.14) (.42)
(.45)
$14.27 $14.82 $13.64
$11.95 $13.09 $9.17
$10.17
10.60% 15.25% 15.38%
.18% 32.38% (5.73)% 4.45%
$237,851 $240,563 $191,598
$188,025 $127,121 $31,189
$41,780
$245,536 $221,626 $183,414
$179,614 $49,769 $35,163
$38,788
%
.93 .99% 1.02%
1.07% 1.40%(b) 1.35% 1.34%
1.15% 1.77% 1.32%
.47% .64%(b) 4.44% 5.02%
37% 39% 76%
116% 65% 202% 226%
$ .0278 $ .0240 $ .0250
N/A N/A N/A N/A
<CAPTION>
May 17,
1994(a)
Through
December 31,
1995 1994
<S> <C>
$9.57 $10.00
.57(c) .27(c)
.82 (.19)
1.39 .08
(.57) (.27)
-- (.24)
(.20) --
-- --
-- --
(.77) (.51)
$10.19 $9.57
14.66% .71%
$34,660 $21,447
$29,510 $15,366
1.00%(c) 1.00%(c)
5.56%(c) 4.84%(c)
456% 361%
N/A N/A
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
47
<PAGE>
<TABLE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<CAPTION>
TOTAL RETURN
BOND PORTFOLIO
--------
- ------------------------------------------------------------
- ---------
Year Ended December 31,
--------
- ------------------------------------------------------------
- ---------
1997
1996 1995 1994
<S> <C>
<C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period
$10.28 $10.62 $9.48
$10.28
Income from investment operations
Net investment income
.57 .57 .62(c)
.47(c)
Net realized and unrealized gains (losses)
on
investment transactions
.35 (.09) 1.18
(.82)
Total from investment
operations
.92 .48 1.80
(.35)
Less distributions
Dividends from net investment income
(.54) (.56) (.58)
(.45)
Distributions in excess of net
investment income
- -- -- --
- --
Distributions from net realized gains
(.10) (.26) (.08)
- --
Distributions in excess of net realized
gains
- -- -- --
- --
Total distributions
(.64) (.82) (.66)
(.45)
Net asset value, end of period
$10.56 $10.28 $10.62
$9.48
TOTAL RETURN(d)
9.23% 5.02% 19.63%
(3.54)%
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, end of period (000)
$50,411 $49,218 $45,118
$31,191
Average net assets (000)
$48,123 $47,246 $37,023
$31,141
Ratios to average net assets
Expenses
.91% .94% .85%(c)
.85%(c)
Net investment income
5.54% 5.67% 6.21%(c)
4.90%(c)
Portfolio turnover rate
323% 340% 141%
121%
<CAPTION>
January 5,
1993(a)
Through
December 31,
1993
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income .44(c)>
Net realized and unrealized gains (losses)
on
investment transactions .56
Total from investment
operations 1.00
Less distributions
Dividends from net investment income (.44)
Distributions in excess of net
investment income (.02)
Distributions from net realized gains (.19)
Distributions in excess of net realized
gains (.07)
Total distributions (.72)
Net asset value, end of period $10.28
TOTAL RETURN(d) 10.18%
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, end of period (000) $25,917
Average net assets (000) $12,594
Ratios to average net assets
Expenses
.85%(b)(c)
Net investment income
3.87%(b)(c)
Portfolio turnover rate 171%
</TABLE>
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidies.
(d) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment of
dividends and distributions.
Total returns for periods of less than one full year are
not annualized.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
48
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM
MORTGAGE BACKED
BOND PORTFOLIO
SECURITIES PORTFOLIO
- ------------------------------------------------------------
- ----------------------------- --------------------------
- -
January 5,
1993(a)
Through
Year Ended December 31,
December Year Ended December 31,
- ------------------------------------------------------------
- ---------- 31, --------------------------
- -
1997 1996 1995
1994 1993 1997 1996
<S> <C> <C>
<C> <C> <C> <C>
$ 10.30 $ 10.51 $ 9.56
$ 10.26 $ 10.00 $ 10.21 $ 10.31
.58 .59 .63
.49 .46(c) .64 .65
.28 (.07) .94
(.71) .46 .23 (.12)
.86 .52 1.57
(.22) .92 .87 .53
(.57) (.59) (.60)
(.48) (.45) (.63) (.63)
-- -- --
- -- -- -- --
(.17) (.14) (.02)
- -- (.18) -- --
-- -- --
- -- (.03) -- --
(.74) (.73) (.62)
(.48) (.66) (.63) (.63)
$10.42 $10.30 $10.51
$9.56 $10.26 $10.45 $10.21
8.57% 5.22% 16.87%
(2.23)% 9.33% 8.82% 5.56%
$95,071 $100,392 $77,125
$62,924 $60,651 $71,596 $73,867
$95,575 $81,723 $68,628
$69,602 $32,441 $71,757 $72,214
%
.71 .73% .79%
.80% .85%(b)(c) .88% .91%
5.64% 5.69% 6.09%
5.06% 4.27%(b)(c) 6.21% 6.44%
249% 311% 93%
77% 129% 128% 102%
<CAPTION>
January 5,
1993(a)
Through
December 31,
1995 1994 1993
<S> <C> <C>
$ 9.51 $ 10.18 $ 10.00
.68(c) .61(c) .57(c)
.83 (.66) .28
1.51 (.05) .85
(.68) (.61) (.57)
(.03) (.01) (.02)
-- -- (.08)
-- -- --
(.71) (.62) (.67)
$10.31 $9.51 $10.18
16.18% (.51)% 8.56%
$69,759 $61,971 $60,100
$65,149 $66,276 $29,710
.85%(c) .85%(c)
.85%(b)(c)
6.79%(c) 6.19%(c)
5.30%(b)(c)
154% 380% 134%
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
49
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MONEY
MARKET PORTFOLIO
--------
- ------------------------------------------------------------
- ---------
Year Ended December 31,
--------
- ------------------------------------------------------------
- ---------
1997
1996 1995 1994
<S> <C>
<C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, beginning of period
$1.00 $1.00 $1.00
$1.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Income from investment operations
Net investment income
.049 .045 .051(c)
.037(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total from investment
operations
.049 .045 .051
.037
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Less distributions
Dividends from net investment income
(.049) (.045) (.051)
(.037)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total distributions
(.049) (.045) (.051)
(.037)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, end of period
$1.00 $1.00 $1.00
$1.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
TOTAL RETURN(d)
4.95% 4.53% 5.25%
3.79%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, end of period (000)
$42,326 $27,397 $18,855
$21,438
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Average net assets (000)
$37,675 $19,132 $20,173
$15,048
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Ratios to average net assets
Expenses
.65% .89% .75%(c)
.50%(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net investment income
4.91% 4.49% 5.18%(c)
4.03%(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
<CAPTION>
January 5,
1993(a)
Through
December 31,
1993
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, beginning of period $1.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Income from investment operations
Net investment income .025(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total from investment
operations .025
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Less distributions
Dividends from net investment income (.025)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total distributions (.025)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, end of period $1.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
TOTAL RETURN(d) 2.56%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, end of period (000) $2,997
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Average net assets (000) $1,407
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Ratios to average net assets
Expenses
.50%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net investment income
2.51%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
</TABLE>
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidies.
(d) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment of
dividends and distributions.
Total return for periods of less than a full year are not
annualized.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning
on page 51
50
<PAGE>
<TABLE>
<S> <C>
THE TARGET PORTFOLIO TRUST
Notes to Financial Statements
</TABLE>
The Target Portfolio Trust (the 'Fund') is an
open-end management
investment company. The Fund was established as a
Delaware business
trust on July 29, 1992 and consists of ten
separate portfolios (the
'Portfolio' or 'Portfolios'): Large
Capitalization Growth Portfolio,
Large Capitalization Value Portfolio, Small
Capitalization Growth
Portfolio, Small Capitalization Value Portfolio,
International
Equity Portfolio, International Bond Portfolio, Total
Return Bond Portfolio, Intermediate-Term Bond Portfolio,
Mortgage Backed Securities Portfolio and U.S. Government
Money Market Portfolio.
All the Portfolios are diversified as defined under the
Investment Company Act
of 1940 except for the International Bond Portfolio.
Investment operations
commenced on January 5, 1993 with the exception of the
International Bond
Portfolio which commenced on May 17, 1994.
The Portfolios' investment objectives are as follows:
Large Capitalization
Growth Portfolio--long-term capital appreciation through
investment primarily in
common stocks that, in the investment adviser's opinion, are
characterized by a
growth of earnings faster than that of the S&P 500; Large
Capitalization Value
Portfolio--total return of capital appreciation and dividend
income through
investment primarily in common stocks that, in the adviser's
opinion, have above
average price appreciation potential; Small Capitalization
Growth
Portfolio--maximum capital appreciation through investment
primarily in common
stocks of 'emerging growth' companies; Small Capitalization
Value
Portfolio--above average capital appreciation through
investment in common
stocks that, in the adviser's opinion, are undervalued or
overlooked in the
marketplace; International Equity Portfolio--capital
appreciation through
investment primarily in common stocks of companies domiciled
outside the United
States; International Bond Portfolio--high total return
through investment
primarily in high quality foreign debt securities
denominated primarily in
foreign currencies; Total Return Bond Portfolio--total
return of current income
and capital appreciation through investment primarily in
fixed-income securities
of varying maturities with a dollar-weighted average
portfolio maturity of more
than four years but not more than fifteen years;
Intermediate-Term Bond
Portfolio--current income and reasonable stability of
principal through
investment primarily in high quality fixed-income securities
of varying
maturities with a dollar-weighted average portfolio maturity
of more than three
years but not more than ten years; Mortgage Backed
Securities Portfolio--high
current income primarily and capital appreciation
secondarily each consistent
with the protection of capital through investment primarily
in mortgage-related
securities; U.S. Government Money Market Portfolio--maximum
current income
consistent with maintenance of liquidity and preservation of
principal through
investment exclusively in short-term securities issued or
guaranteed by the U.S.
Government, its agencies or instrumentalities.
The ability of issuers of debt securities (other than
those issued or
guaranteed by the U.S. Government) held by the Portfolios to
meet their
obligations may be affected by economic or political
developments in a specific
industry, region or country.
- ----------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by
the Fund in the preparation of its financial statements.
Securities Valuations: Securities, including options,
futures contracts
and options thereon, for which the primary market is on a
national securities
exchange, commodities exchange or board of trade are valued
at the last sale
price on such exchange or board of trade on the date of
valuation or, if there
was no sale on such day, at the average of readily available
closing bid and
asked prices on such day.
Securities, including options, that are actively
traded in the
over-the-counter market, including listed securities for
which the primary
market is believed to be over-the-counter, are valued at the
average of the most
recently quoted bid and asked prices provided by a principal
market maker or
dealer.
U.S. Government securities for which market quotations
are available are
valued at a price provided by an independent broker/dealer
or pricing service.
Quotations of foreign securities in a foreign currency
are converted to
U.S. dollar equivalents at the current rate obtained from a
recognized bank or
dealer.
Securities for which market quotations are not
available, are valued in
good faith under procedures adopted by the Trustees.
Securities held by the U.S. Government Money Market
Portfolio are valued
at amortized cost, which approximates market value. Short-
term securities held
by the other portfolios which mature in sixty days or less
are valued at
amortized cost which approximates market value. The
amortized cost method
involves valuing a security at its cost on the date of
purchase and thereafter
assuming a constant amortization to maturity of the
difference between the
principal amount due at maturity and cost. Short-term
securities held by the
other portfolios which mature in more than sixty days are
valued at current
market quotations.
In connection with transactions in repurchase
agreements, it is the Fund's
policy that its custodian take possession of the underlying
collateral
securities, the value of which exceeds the principal amount
of the repurchase
transaction, including accrued interest. If the seller
defaults, and the value
of the collateral declines or, if bankruptcy proceedings are
commenced with
respect to the seller of the security, realization of the
collateral by the Fund
may be delayed or limited.
All securities (except those of the U.S. Government
Money Market
Portfolio) are valued as of 4:15 p.m., New York
- ------------------------------------------------------------
- --------------------
51
<PAGE>
time. The U.S. Government Money Market Portfolio calculates
net asset value as
of 4:30 p.m., New York time.
Securities Transactions and Net Investment Income:
Securities transactions
are recorded on the trade date. Realized gains and losses on
sales of securities
are calculated on the identified cost basis. Dividend income
is recorded on the
ex-dividend date and interest income is recorded on the
accrual basis. The Fund
amortizes premiums and discounts paid on purchases of
portfolio securities as
adjustments to interest income. Expenses are recorded on the
accrual basis which
may require the use of certain estimates by management.
Financial Futures Contracts: A financial futures
contract is an agreement
to purchase (long) or sell (short) an agreed amount of
securities at a set price
for delivery on a future date. Upon entering into a
financial futures contract,
the Portfolio is required to pledge to the broker an amount
of cash and/or other
assets equal to a certain percentage of the contract amount.
This amount is
known as the 'initial margin.' Subsequent payments, known as
'variation margin,'
are made or received by the Portfolio each day, depending on
the daily
fluctuations in the value of the underlying security. Such
variation margin is
recorded for financial statement purposes on a daily basis
as unrealized gain or
loss. When the contract expires or is closed, the gain or
loss is realized and
is presented in the statement of operations as net realized
gain (loss) on
financial futures contracts.
The Portfolio invests in financial futures contracts
in order to hedge its
existing portfolio securities, or securities the Portfolio
intends to purchase,
against fluctuations in value caused by changes in
prevailing interest rates.
Should interest rates move unexpectedly, the Portfolio may
not achieve the
anticipated benefits of the financial futures contracts and
may realize a loss.
The use of futures transactions involves the risk of
imperfect correlation in
movements in the price of futures contracts, interest rates
and the underlying
hedged assets. The International Equity Portfolio,
International Bond Portfolio,
Intermediate-Term Bond Portfolio, Mortgage-Backed Securities
Portfolio and Total
Return Bond Portfolio are the only portfolios that may
invest in financial
futures contracts.
Foreign Currency Translation: The books and records of
the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are
translated into U.S.
dollars on the following basis:
(i) market value of investment securities, other
assets and
liabilities--at the closing rates of exchange;
(ii) purchases and sales of investment securities,
income and expenses--at
the rate of exchange prevailing on the respective dates of
such transactions.
Although the net assets of the Portfolios are
presented at the foreign
exchange rates and market values at the close of the fiscal
period, the
Portfolios do not isolate that portion of the results of
operations arising as a
result of changes in the foreign exchange rates from the
fluctuations arising
from changes in the market prices of securities held at the
end of the fiscal
period. Similarly, the Portfolios do not isolate the effect
of changes in
foreign exchange rates from the fluctuations arising from
changes in the market
prices of long-term portfolio securities sold during the
fiscal period.
Accordingly, these realized foreign currency gains (losses)
are included in the
reported net realized gains (losses) on investment
transactions.
Net realized gains (losses) on foreign currency
transactions represent net
foreign exchange gains (losses) from sales and maturities of
short-term
securities, holding of foreign currencies, currency gains or
losses realized
between the trade and settlement dates of securities
transactions, and the
difference between the amounts of dividends, interest and
foreign taxes recorded
on the Fund's books and the U.S. dollar equivalent amounts
actually received or
paid. Net currency gains and losses from valuing foreign
currency denominated
assets and liabilities at period-end exchange rates are
reflected as a component
of net unrealized appreciation/depreciation on investments
and foreign
currencies.
Foreign security and currency transactions may involve
certain
considerations and risks not typically associated with those
of domestic origin
as a result of, among other factors, the level of
governmental supervision and
regulation of foreign securities markets and the possibility
of political or
economic instability.
Forward Currency Contracts: The International Equity
Portfolio,
International Bond Portfolio, Intermediate-Term Bond
Portfolio and Total Return
Bond Portfolio may enter into forward currency contracts in
order to hedge their
exposure to changes in foreign currency exchange rates on
their foreign
portfolio holdings. A forward currency contract is a
commitment to purchase or
sell a foreign currency at a future date at a negotiated
forward rate. The
Portfolio enters into forward currency contracts in order to
hedge its exposure
to changes in foreign currency exchange rates on its foreign
portfolio holdings
or on specific receivables and payables denominated in a
foreign currency. The
contracts are valued daily at current exchange rates and any
unrealized gain or
loss is included in net unrealized appreciation or
depreciation on investments.
Gain or loss is realized on the settlement date of the
contract equal to the
difference between the settlement value of the original and
renegotiated forward
contracts. This gain or loss, if any, is included in net
realized gain (loss) on
foreign currency transactions. Risks may arise upon entering
into these
contracts from the potential inability of the counter
parties to meet the terms
of their contracts.
Short Sales: The Mortgage-Backed Securities Portfolio
may sell a security
it does not own in anticipation of a decline in the market
value of that
security (short sale). When the Portfolio makes a short
sale, it must borrow the
security sold short and deliver it to the broker-dealer
through which it made
the short sale. The proceeds received from the short sale
are maintained as
collateral for its obligation to deliver the security upon
conclusion of the
sale. The Portfolio may have to pay a fee to borrow the
particular security and
may be obligated to pay over any payments received on such
borrowed securities.
A gain, limited to the the price at which the Portfolio sold
the security short,
or a loss, unlimited in magnitude, will be recognized upon
the termination of a
short sale if the market price at termination is less than
or greater than,
respectively, the proceeds originally received.
Options: The International Equity Portfolio, the
International Bond
Portfolio, the Intermediate-Term Bond Portfolio, the Total
Return Bond Portfolio
and the Mortgage-Backed Securities Portfolio may either
purchase or write
options in order to hedge against adverse market movements
or fluctuations in
value caused by changes in prevailing interest rates or
foreign currency
exchange rates with respect to securities or currencies
which the Portfolio
currently owns or intends to purchase.
- ------------------------------------------------------------
- --------------------
52
<PAGE>
When the Portfolio purchases an option, it pays a premium
and an amount equal to
that premium is recorded as an investment. When the
Portfolio writes an option,
it receives a premium and an amount equal to that premium is
recorded as a
liability. The investment or liability is adjusted daily to
reflect the current
market value of the option. If an option expires
unexercised, the Fund realizes
a gain or loss to the extent of the premium received or
paid. If an option is
exercised, the premium received or paid is an adjustment to
the proceeds from
the sale or the cost basis of the purchase in determining
whether the Portfolio
has realized a gain or loss. The difference between the
premium and the amount
received or paid on effecting a closing purchase or sale
transaction is also
treated as a realized gain or loss. Gain or loss on
purchased options is
included in net realized gain (loss) on investment
transactions. Gain or loss on
written options is presented separately as net realized gain
(loss) on written
option transactions.
The Portfolio, as writer of an option, has no control
over whether the
underlying securities or currencies may be sold (called) or
purchased (put). As
a result, the Portfolio bears the market risk of an
unfavorable change in the
price of the security or currency underlying the written
option. The Portfolio,
as purchaser of an option, bears the risk of the potential
inability of the
counterparties to meet the terms of their contracts.
Reclassification of Capital Accounts: The Fund
accounts for and reports
distributions to shareholders in accordance with American
Institute of Certified
Public Accountants (AICPA) Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and
Return of Capital Distributions by Investment Companies. The
effect of applying
this Statement of Position on the International Bond
Portfolio, Total Return
Bond Portfolio and Intermediate-Term Bond Portfolio was to
reclassify
$(2,982,883), $(248,935) and $28,416, respectively, of net
foreign currency
gains/losses to undistributed net investment income from
accumulated net
realized gains (losses). The Large Capitalization Growth
Portfolio reclassified
$12,653 of net operating losses and $8,632 of distributions
in excess of
realized gains to paid-in capital in excess of par. The
International Bond
Portfolio reclassified $1,275,393 of net operating losses to
paid-in capital in
excess of par. In addition, the Small Capitalization Growth
Portfolio
reclassified $558,010 of net operating losses to accumulated
net realized gains.
The International Equity Portfolio increased undistributed
net investment income
by $3,557,051, decreased accumulated net realized gains by
$3,550,405 and
decreased paid-in capital by $6,646 for transactions
involving foreign
securities and currencies. The Large Capitalization Growth
Portfolio
reclassified $39,675 of dividends in excess of net
investment income to paid-in
capital in excess of par. Lastly, the Small Capitalization
Value Portfolio
reclassified $94,907 of dividends in excess of net
investment income to
accumulated net realized gains (losses). Current year net
investment income, net
realized gains (losses) and net assets were not affected by
this statement.
Dividends and Distributions: The International Bond
Portfolio, Total
Return Bond Portfolio, Intermediate-Term Bond Portfolio and
Mortgage Backed
Securities Portfolio declare dividends of their net
investment income daily and
pay such dividends monthly. The U.S. Government Money Market
Portfolio declares
net investment income and any net capital gain (loss) daily
and pays such
dividends monthly. Each other Portfolio declares and pays a
dividend of its net
investment income, if any, at least annually. Each Portfolio
except for the U.S.
Government Money Market Portfolio declares and pays its net
capital gains, if
any, at least annually.
Income distributions and capital gain distributions
are determined in
accordance with income tax regulations which may differ from
generally accepted
accounting principles.
Taxes: For federal income tax purposes, each portfolio
in the Fund is
treated as a separate tax-paying entity. It is the intent of
each portfolio to
continue to meet the requirements of the Internal Revenue
Code applicable to
regulated investment companies and to distribute all of its
taxable net income
to its shareholders. Therefore, no federal income tax
provision is required.
Withholding taxes on foreign interest and dividends
have been provided for
in accordance with the Portfolios' understanding of the
applicable country's tax
rules and rates.
Deferred Organizational Expenses: A total of $279,000
was incurred in
connection with the organization of the Fund. These costs
have been deferred and
are being amortized ratably over a period of sixty months
from the date the
Portfolio commenced investment operations.
- ----------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential
Investments Fund
Management LLC ('PIFM') pursuant to which PIFM manages the
investment operations
of the Fund, administers the Fund's affairs and is
responsible for the
selection, subject to review and approval of the Trustees,
of the advisers. PIFM
supervises the advisers' performance of advisory services
and makes
recommendations to the Trustees as to whether the advisers'
contracts should be
renewed, modified or terminated. PIFM pays for the costs
pursuant to the
advisory agreements, the cost of compensation of officers of
the Fund, occupancy
and certain clerical and accounting costs of the Fund. The
Fund bears all other
costs and expenses.
PIFM has subadvisory agreements with the advisers
noted below pursuant to
which each adviser furnishes investment advisory services in
connection with the
management of the Portfolios. Each of the two advisers of
the domestic equity
Portfolios--the Large Capitalization Growth Portfolio, Large
Capitalization
Value Portfolio, Small Capitalization Growth Portfolio and
Small Capitalization
Value Portfolio--manages approximately 50% of the assets of
the respective
Portfolio. In general, in order to maintain an approximately
equal division of
assets between the two advisers, all daily cash inflows
(i.e., subscriptions and
reinvested distributions) and outflows (i.e., redemptions
and expenses items)
will be divided between the two advisers as PIFM deems it
appropriate. In
addition, there will be a periodic rebalancing of each
Portfolio's assets to
take account of market fluctuations in order to maintain the
approximately equal
allocation. As a consequence, each Portfolio will allocate
assets from the
better performing of the two advisers to the other.
- ------------------------------------------------------------
- --------------------
53
<PAGE>
<TABLE>
<CAPTION>
Portfolio Adviser
- ----------------- ----------------------------------------
- --
<S> <C>
Large
Capitalization
Growth......... Oak Associates and
Columbus Circle Investors
Large
Capitalization
Value.......... INVESCO MIM Inc. and
Hotchkis and Willey
Small
Capitalization
Growth......... Nicholas-Applegate Capital Management
and
Investment Advisors, Inc.
Small
Capitalization
Value.......... Wood, Struthers & Winthrop and
Lazard Freres Asset Management
International
Equity......... Lazard Freres Asset Management
International
Bond........... Delaware International Advisers Ltd.
(effective August 28, 1997)
Total Return Bond
and
Intermediate-Term
Bond........... Pacific Investment Management Co.
Mortgage Backed
Securities and
U.S. Government
Money Market... Wellington Management Company, LLP
</TABLE>
The management fee paid PIFM is computed daily and
payable monthly, at an
annual rate of the average daily net assets of the
Portfolios specified below
and PIFM, in turn, pays each adviser a fee for its services.
<TABLE>
<CAPTION>
Total
Portfolio Management Fee Adviser Fee
- ------------------------ -------------- -----------
<S> <C> <C>
Large Capitalization
Growth................ .60% .30%
Large Capitalization
Value................. .60% .30%
Small Capitalization
Growth................ .60% .30%
Small Capitalization
Value................. .60% .30%
International Equity.... .70% .40%
International Bond...... .50% .30%
Total Return Bond....... .45% .25%
Intermediate-Term
Bond.................. .45% .25%
Mortgage Backed
Securities............ .45% .25%
U.S. Government Money
Market................ .25% .125%
</TABLE>
The Fund has entered into a distribution agreement
with Prudential
Securities Incorporated ('PSI') for distribution of the
Fund's shares. PSI
serves the Fund without compensation.
PIFM and PSI are indirect, wholly-owned subsidiaries
of The Prudential
Insurance Company of America.
- ----------------------------------------------------------
Note 3. Other Transactions
with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly
owned subsidiary of
PIFM, serves as the Fund's transfer agent. The following
amounts represent the
fees PMFS charged for the year ended December 31, 1997 as
well as the fees due
PMFS as of December 31, 1997.
<TABLE>
<CAPTION>
Amount incurred
for the Amount Due
year ended as of
December 31, December 31,
Portfolio 1997 1997
- ------------------------ ---------------- ------------
<S> <C> <C>
Large Capitalization
Growth................ $ 87,300 $7,100
Large Capitalization
Value................. 88,000 7,200
Small Capitalization
Growth................ 87,400 7,100
Small Capitalization
Value................. 84,100 6,900
International Equity.... 87,100 7,000
International Bond...... 30,300 2,400
Total Return Bond....... 33,200 2,700
Intermediate-Term
Bond.................. 37,800 3,000
Mortgage Backed
Securities............ 43,400 3,400
U.S. Government Money
Market................ 9,300 900
</TABLE>
For the year ended December 31, 1997, PSI earned
approximately $9,334 in
brokerage commissions on behalf of certain portfolio
transactions executed with
the Large Capitalization Value Portfolio.
- ----------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding
short-term
investments and written options, for the year ended December
31, 1997 were as
follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- ---------------------------- ------------ ------------
<S> <C> <C>
Large Capitalization
Growth.................... $189,488,095 $210,723,828
Large Capitalization
Value..................... 52,830,300 66,997,739
Small Capitalization
Growth.................... 158,137,058 167,550,745
Small Capitalization
Value..................... 49,555,710 52,939,930
International Equity........ 86,547,542 120,866,123
International Bond.......... 64,578,523 67,568,433
Total Return Bond........... 160,447,671 150,674,655
Intermediate-Term Bond...... 182,809,187 165,997,214
Mortgage Backed
Securities................ 92,531,517 89,152,151
</TABLE>
The federal income tax basis and unrealized
appreciation/depreciation of
each of the Portfolios' investments, excluding written
options as of December
31, 1997, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation Gross
Unrealized
Portfolio Basis (Depreciation) Appreciation
Depreciation
- ------------- ------------ ------------- ------------
- --------------
<S> <C> <C> <C>
<C>
Large
Capitalization
Growth..... $178,382,309 $67,309,217 $75,542,367
$ 8,233,150
Large
Capitalization
Value...... 186,749,892 89,203,690 91,809,014
2,605,324
Small
Capitalization
Growth..... 135,387,817 33,322,610 40,520,119
7,197,509
Small
Capitalization
Value...... 124,469,201 39,855,878 42,369,158
2,513,280
International
Equity..... 204,795,753 32,440,058 47,880,782
15,440,724
International
Bond....... 30,650,323 (566,957) 323,603
890,560
Total Return
Bond....... 61,225,734 885,349 914,986
29,637
Intermediate-Term
Bond....... 110,994,083 771,785 850,566
78,781
Mortgage
Backed
Securities... 68,892,292 2,413,464 2,511,314
97,850
</TABLE>
- ------------------------------------------------------------
- --------------------
54
<PAGE>
For federal income tax purposes, the Mortgage Backed
Securities Portfolio
had a capital loss carryforward as of December 31, 1997 of
approximately
$1,083,600 which expires in 2002. Such carryforward is after
utilization of
approximately $193,800 of net taxable gains realized and
recognized during the
year ended December 31, 1997. Accordingly, no capital gain
distributions are
expected to be paid to shareholders of the Mortgage Backed
Securities Portfolio
until future net gains have been realized in excess of such
carryforward. In
addition, the International Bond Portfolio and the
International Equity
Portfolio are electing to treat net currency losses of
approximately $165,700
and $60,668, respectively and the Large Capitalization
Growth Portfolio is
electing to treat net capital losses of approximately
$3,715,800 incurred in the
two-month period ended December 31, 1997 as having been
incurred in the
following year.
At December 31, 1997, the Total Return and
Intermediate-Term Bond
Portfolios bought 112 and 300 financial futures contracts,
respectively, on U.S.
Treasury Bonds expiring on March 20, 1998.
The unrealized appreciation on such contracts as of
December 31, 1997 were
as follows:
<TABLE>
<CAPTION>
Value on
Value at December 31,
Unrealized
Portfolio Acquisition 1997
Appreciation
- ---------------------- ----------- ------------ -------
- -------
<S> <C> <C> <C>
Total Return Bond..... $12,494,750 $12,505,000 $
10,250
Intermediate-Term
Bond................ 33,070,250 33,206,625
136,375
</TABLE>
At December 31, 1997, the International Bond Portfolio
had outstanding
forward currency contracts to sell foreign currencies, as
follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contracts Receivable Value
Appreciation
- -------------------- --------------- ---------- ----
- ----------
<S> <C> <C> <C>
Canadian Dollars,
expiring
1/30/98........... $ 947,764 $ 943,054 $
4,710
German
Deutschemarks,
expiring
2/27/98........... 3,203,569 3,123,161
80,408
New Zealand Dollars,
expiring
1/30/98........... 3,150,250 3,094,750
55,500
--------------- ---------- ----
- ----------
$ 7,301,583 $7,160,965
$140,618
--------------- ---------- ----
- ----------
--------------- ---------- ----
- ----------
</TABLE>
At December 31, 1997, the Total Return Bond Portfolio
had outstanding
forward currency contracts to sell foreign currencies, as
follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contracts Receivable Value
Appreciation
- ---------------------- --------------- ---------- -----
- ---------
<S> <C> <C> <C>
German Deutschemarks,
expiring 1/22/98.... $ 2,464,663 $2,431,474 $
33,189
--------------- ---------- -
- ------
--------------- ---------- -
- ------
</TABLE>
At December 31, 1997, the Intermediate-Term Bond
Portfolio had outstanding
forward currency contracts, both to purchase and sell
foreign currencies, as
follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Purchase Contracts Payable Value
Depreciation
- ---------------------- --------------- ---------- -----
- ---------
<S> <C> <C> <C>
Canadian Dollars,
expiring 3/11/98.... $ 1,566,722 $1,505,686
$(61,036)
--------------- ---------- -----
- ---------
--------------- ---------- -----
- ---------
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contracts Receivable Value
Appreciation
- ---------------------- --------------- ---------- -----
- ---------
<S> <C> <C> <C>
Canadian Dollars,
expiring 3/11/98.... $ 1,598,779 $1,505,686 $
93,093
German Deutschemarks
expiring 1/22/98.... 4,921,988 4,855,710
66,278
--------------- ---------- -----
- ---------
$ 6,520,767 $6,361,396
$159,371
--------------- ---------- -----
- ---------
--------------- ---------- -----
- ---------
</TABLE>
Transactions in options written during the year ended
December 31, 1997,
were as follows:
<TABLE>
<CAPTION>
Number of
Premiums
International Bond Portfolio Contracts
Received
- -------------------------------------- --------- ------
- --
<S> <C> <C>
Options outstanding at December 31,
1996................................ -- -
- -
Options written....................... 4,670
$31,872
Options terminated in closing purchase
transactions........................ (4,670)
(31,872 )
--------- ------
- --
Options outstanding at December 31,
1997................................ -- $ -
- -
--------- ------
- --
--------- ------
- --
<CAPTION>
Number of
Premiums
Intermediate-Term Bond Portfolio Contracts
Received
- -------------------------------------- --------- ------
- --
<S> <C> <C>
Options outstanding at December 31,
1996................................ -- $ -
- -
Options written....................... 68
22,494
Options expired....................... (68)
(22,494 )
--------- ------
- --
Options outstanding at December 31,
1997................................ -- $ -
- -
--------- ------
- --
--------- ------
- --
<CAPTION>
Number of
Premiums
Mortgage Backed Securities Portfolio Contracts
Received
- -------------------------------------- --------- ------
- --
<S> <C> <C>
Options outstanding at December 31,
1996................................ 50
$24,494
Options written....................... 80
19,190
Options terminated in closing purchase
transactions........................ (130)
(43,684 )
--------- ------
- --
Options outstanding at December 31,
1997................................ -- $ -
- -
--------- ------
- --
--------- ------
- --
<CAPTION>
Number of
Premiums
Target Total Return Contracts
Received
- -------------------------------------- --------- ------
- --
<S> <C> <C>
Options outstanding at December 31,
1996................................ -- $ -
- -
Options written....................... 38
12,577
Options terminated in closing purchase
transactions........................ -- -
- -
Options expired....................... (38)
(12,577 )
--------- ------
- --
Options outstanding at December 31,
1997................................ -- $ -
- -
--------- ------
- --
--------- ------
- --
</TABLE>
- ------------------------------------------------------------
- --------------------
55
<PAGE>
- ------------------------------------------------------------
- --------------------
Note 5. Capital
The Fund has authorized an unlimited number of shares
of beneficial
interest at $.001 par value per share. Of the shares
outstanding at December 31,
1997, PIFM owned 1,125 shares of each portfolio, except for
the International
Bond Portfolio, of which it owned 244,851 shares.
Transactions in shares of beneficial interest during
the year ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Shares
Issued in
Reinvestment Increase/
of Dividends (Decrease)
Shares
and Shares in Shares
Portfolio Sold
Distributions Reacquired Outstanding
- -------------------------------------- -------------
- ------------ ----------- -----------
<S> <C>
<C> <C> <C>
Large Capitalization Growth
Portfolio........................... 3,273,409
2,367,133 (4,709,116) 931,426
Large Capitalization Value
Portfolio........................... 3,430,654
1,783,097 (4,539,037) 674,714
Small Capitalization Growth
Portfolio........................... 2,375,813
1,448,105 (3,049,714) 774,204
Small Capitalization Value
Portfolio........................... 2,564,741
1,051,562 (2,602,621) 1,013,682
International Equity Portfolio........ 23,121,459
2,177,188 (24,872,919) 425,728
International Bond Portfolio.......... 1,097,817
157,365 (1,963,982) (708,800)
Total Return Bond Portfolio........... 1,432,562
273,531 (1,719,713) (13,620)
Intermediate-Term Bond Portfolio...... 2,836,650
620,854 (4,075,790) (618,286)
Mortgage Backed Securities Portfolio.. 1,308,386
354,474 (2,049,370) (386,510)
</TABLE>
Transactions in shares of beneficial interest during
the year ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Shares
Issued in
Reinvestment
of Dividends Increase
Shares
and Shares in Shares
Portfolio Sold
Distributions Reacquired Outstanding
- -------------------------------------- -------------
- ------------ ----------- -----------
<S> <C>
<C> <C> <C>
Large Capitalization Growth
Portfolio........................... 5,104,185
1,992,947 (4,916,826) 2,180,306
Large Capitalization Value
Portfolio........................... 4,977,765
1,077,960 (4,680,804) 1,374,921
Small Capitalization Growth
Portfolio........................... 3,362,005
1,099,203 (3,168,065) 1,293,143
Small Capitalization Value
Portfolio........................... 3,200,088
356,460 (2,704,301) 852,247
International Equity Portfolio........ 24,759,385
913,832 (23,486,609) 2,186,608
International Bond Portfolio.......... 1,851,839
170,401 (1,313,693) 708,547
Total Return Bond Portfolio........... 1,977,896
356,327 (1,796,916) 537,307
Intermediate-Term Bond Portfolio...... 4,363,436
539,430 (2,495,825) 2,407,041
Mortgage Backed Securities Portfolio.. 2,108,789
378,715 (2,018,658) 468,846
</TABLE>
- ------------------------------------------------------------
- --------------------
56
<PAGE>
THE TARGET PORTFOLIO TRUST
Report of Independent
Accountants
The Shareholders and Trustees of
The Target Portfolio Trust:
In our opinion, the accompanying statements of assets
and liabilities,
including the portfolios of investments, and the related
statements of
operations and of changes in net assets and the financial
highlights present
fairly, in all material respects, the financial position of
the Large
Capitalization Growth Portfolio, Large Capitalization Value
Portfolio, Small
Capitalization Growth Portfolio, Small Capitalization Value
Portfolio,
International Equity Portfolio, International Bond
Portfolio, Total Return Bond
Portfolio, Intermediate-Term Bond Portfolio, Mortgage Backed
Securities
Portfolio and U.S. Government Money Market Portfolio
(constituting The Target
Portfolio Trust, hereafter referred to as the 'Trust') at
December 31, 1997, the
results of each of their operations, the changes in each of
their net assets,
and each of their financial highlights for the year ended
December 31, 1997, in
conformity with generally accepted accounting principles.
These financial
statements and financial highlights (hereafter referred to
as 'financial
statements') are the responsibility of the Trust's
management; our
responsibility is to express an opinion on these financial
statements based on
our audits. We conducted our audits of these financial
statements in accordance
with generally accepted auditing standards which require
that we plan and
perform the audit to obtain reasonable assurance about
whether the financial
statements are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements, assessing the accounting principles used and
significant estimates
made by management, and evaluating the overall financial
statement presentation.
We believe that our audits, which included confirmation of
securities at
December 31, 1997 by correspondence with the custodian and
brokers and the
application of alternative auditing procedures where
confirmations from brokers
were not received, provide a reasonable basis for our
opinion expressed above.
The accompanying statement of changes in net assets for the
year ended December
31, 1996, and financial highlights for the period May 7,
1994 through December
31, 1996 for the International Bond Portfolio and January 5,
1993 through
December 31, 1996 for each of the other nine portfolios,
were audited by other
independent accountants, whose opinion dated February 21,
1997 was unqualified.
PRICE WATERHOUSE LLP
New York, New York
February 25, 1998
- ------------------------------------------------------------
- --------------------
57
<PAGE>
THE TARGET PORTFOLIO TRUST
Change of Auditors
Effective March 1, 1997, Deloitte & Touche LLP was
terminated as the Fund's
independent auditors. For the years ended December 31, 1993
through December 31,
1996, Deloitte & Touche LLP expressed an unqualified opinion
on the Fund's
financial statements. There were no disagreements between
Fund management and
Deloitte & Touche LLP prior to their termination. The Board
of Trustees approved
the termination of Deloitte & Touche LLP and the appointment
of Price Waterhouse
LLP as the Fund's independent accountants.
- ------------------------------------------------------------
- --------------------
58
<PAGE>
THE TARGET PORTFOLIO TRUST
Federal Income Tax Information
As required by the Internal Revenue Code, we wish to
advise you as to the
federal tax status of dividends and distributions paid by
the Fund during its
fiscal year ended December 31, 1997. Further, we wish to
advise you of the
percentage of the ordinary income dividends (excluding long-
term capital gains
distributions) paid in 1997 that qualify for the corporate
dividends received
deduction available to corporate taxpayers.
Detailed below, please find the aggregate dividends and
distributions, per
share, paid by each portfolio during the year ended December
31, 1997 as well as
the corporate dividend received deduction percentage:
<TABLE>
<CAPTION>
Ordinary
Dividends* Long-Term Capital Total
Corporate
--------------------
- ---- Gains Distributions Dividends
Dividend
Short-
Term -------------------------- and
Received
Portfolio Income Capital
Gains 28% 20% Distributions
Deduction
- ------------------------------------- ------ ----------
- ---- --------- ------------- ------------- -----
- ----
<S> <C> <C>
<C> <C> <C> <C>
Large Capitalization Growth
Portfolio.......................... $0.006 $0.348
$ 0.968 $ 0.680 $ 2.002 0%
Large Capitalization Value
Portfolio.......................... 0.280 0.126
0.662 0.775 1.843 85%
Small Capitalization Growth
Portfolio.......................... -- 0.341
1.641 0.345 2.327 0%
Small Capitalization Value
Portfolio.......................... 0.100 0.585
0.530 0.960 2.175 44%
International Equity Portfolio....... 0.410 0.410
0.700 0.560 2.080 0%
International Bond Portfolio......... 0.420 --
- -- --** 0.420 0%
Total Return Bond Portfolio.......... 0.500 0.100
- -- -- 0.600 0%
Intermediate-Term Bond Portfolio..... 0.571 0.095
- -- 0.070 0.735 0%
Mortgage Backed Securities
Portfolio.......................... 0.636 --
- -- -- 0.636 0%
U.S. Government Money Market
Portfolio.......................... 0.049 --
- -- -- 0.049 0%
</TABLE>
* For federal income tax purposes, ordinary income
dividends and short-term
capital gains distributions are taxable as ordinary income.
Long-term capital
gains distributions are taxable as capital gains income.
** Less than $.005 per share taxable as 20% rate gain.
Important Notice For Certain
Shareholders
Many states do not tax the portion of mutual fund
dividends attributed to
interest from U.S. Government obligations. Listed below is
the percentage of
interest earned by the following TARGET portfolios from U.S.
Government
obligations for the calendar year 1997.
To determine the amount of your dividends which may be
exempt from state and
local tax, simply multiply the amount in Box 1b of your 1099-
Div (Ordinary
Dividends) by the percentage listed below. These percentages
do not apply to
taxable capital gain distributions paid by the portfolios.
<TABLE>
<CAPTION>
Percentage of Interest from
U.S. Government
Portfolio* obligations
- ---------------------------- ---------------------------
<S> <C>
Small Capitalization
Value....................... 2.86%
International Equity........ 2.86%
International Bond.......... 2.26%
Total Return Bond........... 4.79%
Intermediate-Term Bond...... 2.04%
U.S. Government Money
Market...................... 15.76%
</TABLE>
* Due to certain minimum portfolio holding requirements
in California,
Connecticut and New York, residents of those states will not
be able to exclude
1997 U.S. interest income from state and local taxes.
Please consult your tax advisor or state/local
authorities to properly report
this information on your tax return. If you have any
questions concerning the
amounts listed above, please call your Prudential Securities
Financial Advisor.
- ------------------------------------------------------------
- --------------------
59
<PAGE>
Large Capitalization
Growth Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
18.97% 11.06%
Without Advisory Fee One Year Since Inception
(1/5/93)
20.77% 12.74%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance
and an investor's shares, when redeemed, may be worth more
or less than their original cost.
This graph is furnished to you in accordance with SEC
regulations. It compares a $10,000 investment in the
Target Large Capitalization Growth Portfolio with a
similar investment in the Standard & Poor's 500 Index
(S&P 500) by portraying the initial account values on
commencement of operations and subsequent account values
at the end of each fiscal year (December 31), as measured
on a quarterly basis, beginning in 1993. The graph and the
accompanying table take into account the maximum quarterly
investment advisory fee associated with the Prudential
Securities Target Program of 1.50% annually. For individual
retirement plans and qualified employee benefit plans,
taking
into account the maximum investment advisory fee of 1.25%,
the
average annual total return since inception would have been
11.34% and the growth of a $10,000 investment would have
been $17,083.
The S&P 500 is a capital-weighted index, representing the
aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500
is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction
costs. The securities which comprise the S&P 500 may differ
substantially from the securities in the Portfolio. The S&P
500 is not the only index which may be used to characterize
performance of growth equity funds and other indices may
portray different comparative performance.
60
<PAGE>
Large Capitalization
Value Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
27.87% 14.70%
Without Advisory Fee One Year Since
Inception (1/5/93)
29.80% 16.43%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance and
an investor's shares, when redeemed, may be worth more or
less
than their original cost.
This graph is furnished to you in accordance with SEC
regulations. It compares a $10,000 investment in the Target
Large Capitalization Value Portfolio with a similar
investment
in the Standard & Poor's 500 Index (S&P 500) by portraying
the initial account values on commencement of operations
and subsequent account values at the end of each fiscal year
(December 31), as measured on a quarterly basis, beginning
in 1993. The graph and the accompanying table take into
account the maximum quarterly investment advisory fee
associated with the Prudential Securities Target Program
of 1.50% annually. For individual retirement plans and
qualified employee benefit plans, taking into account
the maximum investment advisory fee of 1.25%, the
average annual total return since inception would have
been 14.99% and the growth of a $10,000 investment would
have been $20,062.
The S&P 500 is a capital-weighted index, representing the
aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P
500 is an unmanaged index and includes the reinvestment
of all dividends, but does not reflect the payment of
transaction costs. The securities which comprise the
S&P 500 may differ substantially from the securities
in the Portfolio. The S&P 500 is not the only index
which may be used to characterize performance of growth
equity funds and other indices may portray different
comparative performance.
61
<PAGE>
Small Capitalization
Growth Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
19.05% 14.08%
Without Advisory Fee One Year Since Inception
(1/5/93)
20.85% 15.80%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance
and an investor's shares, when redeemed, may be worth more
or less than their original cost.
This graph is furnished to you in accordance with SEC
regulations. It compares a $10,000 investment in the
Target Small Capitalization Growth Portfolio with a
similar investment in the Russell 2000 Index (Russell
2000) by portraying the initial account values on
commencement of operations and subsequent account
values at the end of each fiscal year (December 31),
as measured on a quarterly basis, beginning in 1993.
The graph and the accompanying table take into account the
maximum
quarterly investment advisory fee associated with the
Prudential Securities Target Program of 1.50% annually.
For individual retirement plans and qualified employee
benefit plans, taking into account the maximum investment
advisory fee of 1.25%, the average annual total return
since inception would have been 14.36% and the growth of
a $10,000 investment would have been $19,524.
The Russell 2000 is a stock market index comprised of the
2,000 smallest U.S. domiciled publicly traded common stocks
that are included in the Russell 3000 Index. These common
stocks represent approximately 10% of the total market
capitalization of the Russell 3000 Index. The Russell
3000 Index is comprised of the 3,000 largest U.S.
domiciled publicly - traded common stocks by market
capitalization representing approximately 98% of the
U.S. publicly - traded equity market. The Russell 2000 is
an unmanaged index and includes the reinvestment of
all dividends, but does not reflect the payment of
transaction costs. The securities that comprise the
Russell 2000 may differ substantially from the
securities in the Portfolio. The Russell 2000
is not the only index which may be used to characterize
performance of growth funds and other indices may portray
different comparative performance.
62
<PAGE>
Small Capitalization
Value Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
28.04% 15.54%
(15.53%)*
Without Advisory Fee One Year Since
Inception (1/5/93)
29.98% 17.29%
(17.28%)*
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance and
an investor's shares, when redeemed, may be worth more or
less
than their original cost.
This graph is furnished to you in accordance with SEC
regulations. It compares a $10,000 investment in the Target
Small Capitalization Value Portfolio with a similar
investment
in the Russell 2000 Index (Russell 2000) by portraying the
initial
account values on commencement of operations and subsequent
account values at the end of each fiscal year (December 31),
as measured on a quarterly basis, beginning in 1993. The
graph
and the accompanying table take into account the maximum
quarterly investment advisory fee associated with the
Prudential
Securities Target Program of 1.50% annually. For individual
retirement plans and qualified employee benefit plans,
taking
into account the maximum investment advisory fee of 1.25%,
the
average annual total return since inception would have been
15.83% and the growth of a $10,000 investment would have
been
$20,809.
The Russell 2000 is a stock market index comprised of the
2,000
smallest U.S. domiciled publicly traded common stocks that
are
included in the Russell 3000 Index. These common stocks
represent
approximately 10% of the total capitalization of the
Russell 3000 Index. The Russell 3000 Index is comprised of
the
3,000 largest U.S. domiciled publicly - traded common stocks
by market capitalization representing approximately 98% of
the U.S. publicly - traded equity market. The Russell 2000
is an
unmanaged index and includes the reinvestment of all
dividends,
but does not reflect the payment of transaction costs. The
securities that comprise the Russell 2000 may differ
substantially from the securities in the Portfolio. The
Russell 2000 is not the only index which may be used to
characterize performance of growth funds and other indices
may portray different comparative performance.
*Without Waiver of Management Fees and/or expense
subsidizations, the Portfolio's Average Annual Total
returns would have been lower, as indicated in parenthesis (
).
63
<PAGE>
International Equity
Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
8.95% 12.63%
Without Advisory Fee One Year Since
Inception (1/5/93)
10.60% 14.34%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance
and an investor's shares, when redeemed, may be worth more
or less than their original cost.
This graph is furnished to you in accordance with SEC
regulations. It compares a $10,000 investment in the
Target International Equity Portfolio with a similar
investment in the Morgan Stanley Capital International
Europe, Australia, Far East Index (EAFE Index) by
portraying the initial account values on commencement
of operations and subsequent account values at the end
of each fiscal year (December 31), as measured on a
quarterly basis, beginning in 1993. The graph and the
accompanying table take into account the maximum
quarterly investment advisory fee associated with
the Prudential Securities Target Program of 1.50%
annually. For individual retirement plans and
qualified employee benefit plans, taking into
account the maximum investment advisory fee of
1.25%, the average annual total return since
inception would have been 12.92% and the growth
of a $10,000 investment would have been $18,324.
The EAFE Index is an arithmetical average weighted
by market value of the performance of over 1,000
non-U.S. companies representing 20 stock markets
in Europe, Australia, New Zealand and the Far East.
The EAFE Index is an unmanaged index and
includes the reinvestment of all dividends, but
does not reflect the payment of transaction costs.
The securities which comprise the EAFE Index may
differ substantially from the securities in the
Portfolio. The EAFE Index is not the only index that
may be used to characterize performance of international
equity funds and other indices may portray different
comparative performance.
64
<PAGE>
International Bond
Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (5/17/94)
-6.67%
2.57%
Without Advisory Fee One Year Since
Inception (5/17/94)
-5.73%
3.60%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance and
an investor's shares, when redeemed, may be worth more or
less
than their original cost.
This graph is furnished to you in accordance with SEC
regulations.
It compares a $10,000 investment in the Target International
Bond
Portfolio with a similar investment in the Salomon Smith
Barney
Non-US World Government Bond Index (WB Index) by
portraying the initial account values on commencement of
operations and subsequent account values at the end of each
fiscal year (December 31), as measured on a quarterly basis,
beginning in 1994. The graph and the accompanying table take
into
account the maximum quarterly investment advisory fee
associated with the Prudential Securities Target Program
of 1.00% annually. For individual retirement plans and
qualified employee benefit plans, taking into account
the maximum investment advisory fee of 1.35%, the average
annual total return since inception would have been 2.21%
and the growth of a $10,000 investment would have been
$10,827.
The WB Index measures the total return performance of high-
quality
securities in major sectors of the international bond
market.
The index covers approximately 600 bonds from 17 currencies.
Only high-quality, straight issues are included. The index
is calculated on both a weighted and an unweighted basis.
Generally, index samples for each market are restricted to
bonds with a least 1 year of remaining life. The WB Index
is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction
costs. The securities which comprise the WB Index may differ
substantially from the securities in the Portfolio. The WB
Index is not the only index that may be used to characterize
performance of international bond funds and other indices
may portray different comparative performance.
The name of the benchmark used for the International Bond
Portfolio has been changed to the Salomon Smith Barney
Non-US World Government Bond Index.
65
<PAGE>
Total Return Bond
Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
8.15%
6.79% (6.65%)*
Without Advisory Fee One Year Since
Inception (1/5/93)
9.23%
7.86% (7.23%)*
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance and
an investor's shares, when redeemed, may be worth more or
less
than their original cost.
This graph is furnished to you in accordance with SEC
regulations.
It compares a $10,000 investment in the Target Total Return
Bond
Portfolio with a similar investment in the Lehman
Government/Corporate
Index (LGCI) by portraying the initial account
values on commencement of operations and subsequent account
values at the end of each fiscal year (December 31), as
measured on a quarterly basis, beginning in 1993. The graph
and the accompanying table take into account the maximum
quarterly
investment advisory fee associated with the Prudential
Securities Target Program of 1.00% annually. For individual
retirement plans and qualified employee benefit plans,
taking
into account the maximum investment advisory fee of 1.35%,
the average
annual total return since inception would have been 6.42%
and
the growth of a $10,000 investment would have been $13,635.
The LGCI is a weighted index comprised of publicly traded
intermediate and long-term government and corporate debt
with an average maturity of ten years. The LGCI is an
unmanaged index and includes the reinvestment of all income,
but does not
reflect the payment of transaction costs. The securities
that comprise
the LGCI may differ substantially from the securities in the
Portfolio.
The LGCI is not the only index that may be used to
characterize
performance of bond funds and other indices may portray
different comparative performance.
*Without waiver of management fees and/or expense
subsidization,
the Portfolio's Average Annual Total returns would have been
lower,
as indicated in parenthesis ( ).
66
<PAGE>
Intermediate-Term
Bond Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
7.49%
6.33%
Without Advisory Fee One Year Since
Inception (1/5/93)
8.57%
7.39%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance and
an
investor's shares, when redeemed, may be worth more or less
than
their original cost.
This graph is furnished to you in accordance with SEC
regulations.
It compares a $10,000 investment in the Target Intermediate-
Term
Bond Portfolio with a similar investment in the Lehman
Intermediate
Government/Corporate Index (LIGC Index) by portraying the
initial
account values on commencement of operations and subsequent
account values at the end of each fiscal year (December 31),
as measured on a quarterly basis, beginning in 1993. The
graph
and the accompanying table take into account the maximum
quarterly investment advisory fee associated with the
Prudential Securities Target Program of 1.00% annually.
For individual retirement plans and qualified employee
benefit plans, taking into account the maximum investment
advisory fee of 1.35%, the average annual total return
since inception would have been 5.95% and the growth of
a $10,000 investment would have been $13,342.
The LIGC Index is a weighted index comprised of securities
issued or backed by the U.S. government and its agencies
and securities publicly issued by corporations with one to
ten years remaining to maturity, rated investment grade and
having $50 million or more outstanding. The LIGC is an
unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction
costs. The securities that comprise the LIGC may differ
substantially from the securities in the Portfolio. The
LIGC is not the only index that may be used to characterize
performance of intermediate-term bond funds and other
indices
may portray different comparative performance.
67
<PAGE>
Mortgage Backed
Securities Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
7.73%
6.59% (6.49%)*
Without Advisory Fee One Year Since
Inception (1/5/93)
8.82%
7.67% (7.56%)*
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not predictive of future performance and
an
investor's shares, when redeemed, may be worth more or less
than
their original cost.
This graph is furnished to you in accordance with SEC
regulations. It compares a $10,000 investment in the Target
Mortgage-Backed Securities Portfolio with a similar
investment
in the Salomon Smith Barney Mortgage Backed Securities Index
(Mortgage
Index) by portraying the initial account values on
commencement
of operations and subsequent account values at the end of
each
fiscal year (December 31), as measured on a quarterly basis,
beginning in 1993. The graph and the accompanying table take
into account the maximum quarterly investment advisory fee
associated with the Prudential Securities Target Program of
1.00% annually. For individual retirement plans and
qualified
employee benefit plans, taking into account the maximum
investment
advisory fee of 1.35%, the average annual total return since
inception would have been 6.22% and the growth of a $10,000
investment would have been $13,511.
The Mortgage Index is comprised of 30D and 15D year GNMA,
FNMA and FHLMC pass-through, and FNMA and FHLMC balloon
mortgages. The Mortgage Index is an unmanaged index and
includes the reinvestment of all cash-flows, but does not
reflect the payment of transaction costs. The securities
which comprise the Mortgage Index may differ substantially
from the securities in the Portfolio. The Mortgage Index is
not the only index that may be used to characterize
performance
of mortgage-backed security funds and other indices may
portray
different comparative performance.
*Without waiver of management fees and/or expense
subsidization,
the Portfolio's Average Annual Total returns would have been
lower, as indicated in parentheses ( ).
68
<PAGE>
(ICON)
<PAGE>
Trustees
Eugene C. Dorsey
Douglas H. McCorkindale
Thomas T. Mooney
Richard A. Redeker
Officers
Richard A Redeker
President
Robert F. Gunia
Vice President
Grace C. Torres
Treasurer
Stephen M. Ungerman
Assistant Treasurer
S. Jane Rose
Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Advisers
Columbus Circle Investors
Metro Center
One Station Plaza
Stamford, Connecticut 06902
Delaware International
80 Cheapside
London, ECZV6EE
Hotchkis and Wiley
800 West Sixth Street
Los Angeles, California 90017
INVESCO Capital Management
1315 Peachtree Street
Suite 500
Atlanta, GA 30309
Investment Advisors, Inc.
3700 First Bank Place
P.O. Box 357
Minneapolis, Minnesota 55440
Lazard Frares Asset Management
30 Rockefeller Plaza
New York, NY 10020
Oak Associates
3875 Embassy Parkway
Suite 250
Akron, OH 44333
Nicholas-Applegate
Capital Management
600 West Broadway
San Diego, CA 92101
Pacific Investment
Management Company
840 Newport Center Drive
Newport Beach, CA 92658
Wellington Management Company
75 State Street
Boston, MA 02109
Wood, Struthers & Winthrop
277 Park Avenue
New York, NY 10005
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and
Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund
Services LLC
Raritan Plaza One
Edison, NJ 08837
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795\
(ICON)
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a current
prospectus.
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